![\"Kevin](\"http:\/\/blog.uwsp.edu\/cps\/wp-content\/uploads\/sites\/2\/2019\/11\/CPS-BusEcon-Bahr-Kevin-683x1024.jpg\")
<\/figure>Unfortunately,\nthe coronavirus has become an increasing global health concern. As the death\ntoll and number of people infected with the coronavirus rises, the global\noutbreak has also influenced financial markets. <\/p>\n\n\n\n
Financial\nmarkets hate uncertainty. Uncertainty can lead to market declines and\nsignificant increases in market volatility. When September 11 occurred it not\nonly had a major impact on the psyche of Americans, it also had a profound\nnegative impact on stock markets \u2013 globally. Uncertainty can create fear and\nfollowing 9\/11 no one knew exactly what was going to happen. That fear\nresonated in U.S. and foreign financial markets, because it is a global\nmarketplace. The greater the uncertainty, the greater the fear.<\/p>\n\n\n\n
U.S. stock\nmarkets were closed for almost a week after the 9\/11 terrorist attacks. When\nthey reopened on September 17 stocks sank \u2013 the Dow Jones Industrial Index (an\nindex of 30 \u201cblue chip\u201d companies) fell 7.13%; the NASDAQ (technology index) fell\n6.83%; the S&P 500 (an index of 500 large U.S. firms) declined 4.83%.\nStocks within the travel and leisure industry were particularly hard hit. The\nairlines \u2013 Delta, U.S. Air, and American Airlines (AMR) declined 45%, 52%, and\n39%, respectively, on September 17. Hilton declined 24% while Carnival fell\n32%. The terrorist attacks placed great uncertainty on Americans willingness\nand ability to travel, whether by air or sea, and the need for vacation\nlodging. The impacts on the travel and leisure industry would ripple through\nthe economy \u2013 as consumer spending declines, it would have a dampening effect\non the entire U.S. economy.<\/p>\n\n\n\n
The 9\/11\nattacks created great uncertainty for the U.S. economy, and if the U.S. economy\nsuffers a downturn, it will impact economies and financial markets around the\nworld. On September 11, 2001 as news of the attacks spread, British stocks fell\nnearly 6%, German stocks were down over 8%, while French stocks declined over\n7%. The world is connected economically and financially.<\/p>\n\n\n\n
As\nuncertainty and fear waned, financial markets recovered. The S&P 500 was\nalmost fully recovered a year after 9\/11. However, the initial uncertainty can\nmake financial markets react negatively, and sometimes overreact.<\/p>\n\n\n\n
Thousands\ndied in the 9\/11 attacks. Fortunately, and thankfully, that has not happened\nyet from the coronavirus. Recently the coronavirus has been mentioned as a\nfactor contributing to increased market uncertainty and stock market declines.\nCertainly, the coronavirus is not the only news item affecting financial\nmarkets. Questions have been raised about current stock valuations, Europe has\nBrexit, the U.S. has an impeachment trial, questions remain about trade, and according\nto the Congressional Budget Office, the U.S. deficit will continue to increase\nand top $1 trillion in 2020 despite the current prolonged economic expansion.\nNo, the coronavirus is not the only factor affecting financial markets.\nHowever, if uncertainty increases due to the virus, financial markets will\ndefinitely be impacted – negatively. Everything from travel to healthcare to\ninternational trade could be impacted. That impact would likely include\ndeclining stock prices and increased market volatility due to the uncertainty. The\nresult would be a negative rippling effect through the global economic and financial\nmarkets.<\/p>\n\n\n\n
One final\npoint, economic expansions can be derailed by an unexpected and unforeseen\nevent (for example, the financial crisis of 2007-2009). Consumer spending\naccounts for approximately two-thirds of GDP growth and growth in consumer\nspending has fueled the current economic expansion. Any event that reduces that\nspending could derail the economic expansion. Much uncertainty remains, but\ngiven that uncertainty, the coronavirus has that potential. <\/p>\n\n\n\n