Were You Affected by the Coronavirus Stock Market Crash?

The coronavirus stock market has not been easy on investors. As prolonged social distancing closes businesses and leaves millions out of work, the stock market has been affected. Investors, particularly retirees and those close to retirement, have suffered losses. Some say their financial advisors gave them bad advice and, in certain cases, acted recklessly or even fraudulently.

How Does Coronavirus Affect the Stock Market?

For those who do not follow the stock market, understanding how something as unprecedented as COVID-19 and the coronavirus economic impact can affect investors may be difficult. It’s important to understand a few key terms in order to see how the coronavirus pandemic has affected the stock market.

While most do not consider themselves “investors,” like the day traders yelling on Wall Street often portrayed in movies, many American’s are relying on retirement investments through their 401(k) or IRAs to sustain them in old age. The vast majority of these retirement investments are handled through one of several major stock market indexes, the Dow Jones Industrial Average, or S&P 500, according to Nerd Wallet,

In its most basic sense, these stock markets work like any other market, from a grocery store to a car dealership – they are a place for investors to buy stock in a company. Investopedia defines “stock” as ownership in a fraction of a company.

In sum, when economists and news sources talk about the stock market going up and down, they are talking about the fluctuating value of different companies.

The economic impact of COVID-19 was widespread, affecting jobs and consumer spending on many levels. In March, as communities across the world shut down in an effort to slow the spread of the disease, stock markets reacted by crashing. However, according to reports at the time, the stock market appeared to make significant gains, offsetting the original losses. Experts warned that these short term gains should be viewed by investors with suspicion.

“I don’t see any meaningful bottom for stocks until we get some wins against the virus. Italy has to see new infections peak,” Ritholz Wealth Management CEO Joshua Brown wrote on The Reformed Broker in late March.

The coronavirus stock market crash in the spring left investors scrambling to shore up their funds. Many investors, particularly retirees or those close to retirement, turned to their financial advisors to help them during this volatile time. Certain financial advisors are duty-bound to work in the best interests of their clients. This includes ensuring a client’s investment portfolio is diversified such that if one investment loses money, the client has money in other investments to keep them from losing everything.

However, not every financial advisor is legally bound to act in the client’s best interest. Many investors may not realize there is a distinction between different types of advisors. Fiduciary financial advisors are required to always act in good faith and abide by several standards set in place by the Securities and Exchange Commission (SEC), non-fiduciary advisors are not constrained by the same obligations. In fact, many financial advisors may have committed fraud. PBS’s Frontline reported on a study that found approximately 7% of financial advisors have been disciplined for fraud or other misconduct. And 38% of advisors caught committing fraud were repeat offenders. The study also found that nearly half of the financial advisors fired for fraud were able to find another job in the industry within a year.

There are many ways a financial advisor may negatively affect financial investments. If they push clients to choose products or packages they don’t understand, they may not be acting in the client’s best interest. Other signs may include an undiversified portfolio or a heavy emphasis on stocks rather than other types of investments.

Financial advisor scams may be on the rise due to the chaos caused by the coronavirus stock market crash. In some cases, scammers may be posing as credit counselors or financial advisors in order to gain access to consumers’ accounts and commit financial fraud.

Can You Expect Another Coronavirus Stock Market Crash?

According to Claudia Sahm, a former Federal Reserve staff economist who now works for the Washington Center on Equitable Growth, it’s difficult to know the future impact of the coronavirus on the stock market.

“The markets are telling us a few things,” Sahm told Vox.com in March. “The most important thing is that they don’t know what’s going on, and these are professionals who are supposed to know what’s going on. But this makes sense since there’s a lot of uncertainty about how the crisis will unfold.”

Uncertainty around the spread of COVID-19 has not gone away. The Motley Fool reports that there are several factors that may cause another coronavirus stock market crash. Another virus surge leading to shutdowns, an extended delay in a  vaccine, or a vaccine that doesn’t work as well as expected.

Uncertainty about the upcoming presidential election combined with concerns about the spread of COVID-19 could unsettle investors and the stock market. The federal government’s failure to pass another coronavirus stimulus package has also shackled the market, according to The Motley Fool.

Market forces such as delinquent auto loans or a change in tech investments could also send the U.S. economy into recession. And the Federal Reserve, which has kept lending rates down, may not be able to continue, causing the cost of loans to rise and further cripple the economy.

Can a Financial Advisor Help?

A financial planner is a professional trained in investing and other financial matters. A good financial planner can help an investor manage their money and plan for future financial goals, from buying a house, to paying for college, and making sure they have enough money to live in retirement. But, according to The Balance, not all who call themselves “financial planners” have the same training or expertise. Not all financial planners take time to understand their client’s goals. Additionally, those paid on commission may try to sell their clients investment products that may not be appropriate.

What If You Got Bad Investment Advice?

If you worked with a financial planner and are concerned about your investments amid the economic impact of coronavirus, you may have gotten bad advice. An experienced attorney can help you understand if your financial planner is responsible for your stock market losses during the pandemic.

For an attorney to help evaluate your claim, be sure to gather any paperwork related to your investments, including statements and any agreements with your financial planner.

Free Coronavirus Financial Impact Claim Evaluation

If you followed the advice of a financial advisor during the COVID-19 pandemic and lost money as a result, you may be eligible to file a coronavirus financial impact lawsuit and seek compensation for your losses.

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