Residents of the state are starting to see the financial effects of COVID-19 at the gas pump.
Talks to cut oil production amid global travel restrictions collapsed over the weekend. As a result, oil producers in the Middle East have gone to great lengths to increase production, creating a surplus and driving down prices.
Coronavirus in Michigan: key information
Latest developments: Two confirmed cases of COVID-19 have been identified in Michigan.
What you should do:
- Wash your hands with soap and water for at least 20 seconds.
- Avoid touching your eyes, nose, or mouth with unwashed hands.
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- Avoid contact with sick people.
- Stay home if you are sick and contact your health care provider.
Sam huszczo is a financial advisor and founder of SGH Wealth management. He says WDETIt’s Alex McLenon that as Wall Street braces for the worst-case scenario, it may be some time before serious economic impacts are felt in Michigan.
Click on the player above to listen to the interview with SGH Sam Huszczo of Wealth Management, and read excerpts, edited for length and clarity, below.
Alex McLenon, 101.9 WDET: What do we see happening with the stock market and how is it related to the coronavirus?
Sam Huszczo, SGH Wealth management: Investors are trying to figure out what the high-end implications of supply chains, reduced travel, and any other incidental spillage of what could be the worst-case scenario might be. When the elements are at their most uncertain point, it’s usually when we can allow our minds to enter the worst-case scenario.
So what’s really going on is we’re looking at what these worst case scenarios are. But much is still far too uncertain to make any real claims about the potential impact of this error. But the emotions certainly set in, and that’s the reason we saw the runoff that we saw.
Over the weekend, one of the most recent developments has been what is happening with Moscow and OPEC. Can you explain what is going on there?
Oil has been crushed this year outside of even what’s going on in negotiations and things of that nature. OPEC I would say they are losing some of their power, just because the United States is also a big oil player now. So I wouldn’t be surprised if other regions test OPECmetal at a time like this.
But honestly, the biggest thing in driving this economy forward, in our opinion, is just consumption. One thing that gives us confidence is that unemployment is very low. So as long as everyone still has jobs and Americans act like Americans and spend a large chunk of their wages, consumption alone could drive this economy forward.
Could these spending be hampered by coronavirus fears?
Yeah, I mean it’s interesting to that degree. The biggest consumer opinion survey is just the University of Michigan Opinion Survey, which we read religiously. Two weeks ago, only 8% of those polled mentioned the coronavirus as a problem. The most recent last Friday, which jumped to 20% of respondents mentioning the coronavirus.
So it’s definitely a lot more cutting edge and maybe even higher at the end of this week. But to put it in context, consumer sentiment is 7.7% higher than it was a year ago today. How does it mate with the coronavirus panic? It’s a hard thing to decouple, but I would say people are a little more confident than they were at least a year ago.
How could people expect to see the impact of what is happening with the stock market? Whether it’s a fear reaction or overreaction or whatever, how could it fall back to the local level and in what ways might people notice it?
The way the coronavirus is reacting in terms of the number of cases and death rates, these numbers need to be watched very closely over the next 9 to 12 weeks. But in terms of a Detroit local, I mean, I’m a longtime Detroiter. I wish we had at least more than one tourist area in the Detroit area, but tourism is going to drop dramatically.
Everything else will have to do with supply chains. Obviously, being part of the automakers, anyone involved in sourcing from China or something like that, it could get a lot more difficult. But, if this goes on for a long time and some of that manufacturing shifts to making items in the United States, the net result for us as citizens would be higher prices.