Where will the market slide end?

Stock markets held up fairly well in the first weeks of the coronavirus outbreak in China, but fell sharply when a large number of cases were reported in Italy. In one week more than half a year of gains were wiped out in a brutal swing reminiscent of the financial crisis more than a decade ago.

Yet analysts note that such abrupt market corrections -- a swift drop of at least 10% from a recent peak -- have happened nearly every year over the past decade.

"Drops of 10 to 20%, that's nothing special," said Alexandre Hezez, Group Chief Investment Officer at asset manager Richelieu Gestion.

But the shock wave differs from those felt in 2008, which ravaged the financial sector before paralysing the broader economy, and in 2000 when the internet bubble burst.

This time, stock markets faced "an external shock," Hezez said. "If investors do not see a political, medical and monetary response, the market could fall lower still," he forecast.

Christian Parisot at the Aurel BCG brokerage felt however that "central bankers will keep us from arriving at that point."

And the real economy?

Growth forecasts for the first quarter of 2020 and the year as a whole have been lowered by most economists, and that is based on a fairly limited impact from the virus leading to a rebound in the second quarter.

The slowdown will clearly be sharper in China. The International Monetary Fund (IMF) has revised its growth forecast for the world's second biggest economy down from 6.0% to 5.6%, and Moody's expects it to be weaker still, at 5.2%.

That is certain to affect other countries, so Swiss bank Credit Suisse has trimmed its 2020 global growth forecast by 0.2%age points to 2.2%.

Countries such as Germany that export a lot to China will probably be hit hard, and some others could fall into recession.

Japan is a case in point, given a drop in output already late last year, while a mini-rebound in Italy, the European country hit hardest by the virus so far, now appears to be in trouble.

In 2019, Italy's economy, the third biggest in the eurozone, grew by just 0.2%.

Across the Atlantic however, growth in the United States is fairly strong, owing to resilient consumer spending on the back of "solid job growth and real wage gains," noted Sara Johnson, director of the global economic unit at IHS Markit.

In 2009, the world suffered an overall recession, with global gross domestic product (GDP) contracting by more than three%.

Could things get worse?

"The longer this goes on the more people will become afraid, which will weaken confidence," said Sylvie Matelly, deputy director of the French Institute for International Relations and Strategic Affairs.

"There will be quarantines or cities blocked, and that means less economic activity and more ruptures in supply chains," she added.

Johnson felt that "the danger is that the outbreak spreads more widely and rapidly than we expected, leading to production shutdowns and travel restrictions outside of the Asia Pacific region."

While she believes that "financial markets have over-reacted to the downside risks to the global economy," Johnson noted there is a danger "that reaction could have adverse consequences" to it, nonetheless.

Matelly said that could happen if the market panic sparked runs on banks in China or other countries hit hard by the coronavirus where government finances are fragile.

"That is the scenario that would lead to a very serious economic crisis," she warned.

But it's not certain such a scenario will come to pass.

"The hypothesis of a quick rebound" in the global economy has been discounted, said Christian Parisot.

But "that does not call into question the hypothesis that things will improve" even if the outbreak wreaks havoc with the economy in the first half of the year and not just the first quarter," he added.

• Keywords

• global economy

• growth forecast

• hit hard

• stock markets

March 19, 2020 5 min read

Opinions expressed by Entrepreneur contributors are their own.

As the world deals with the magnitude of the COVID-19 virus, we find our daily lives transformed in ways we never thought possible. Businesses are experiencing a period of growing uncertainty. All signed contracts seem to be at risk. Many organizations are restricting travel, limiting employee congregations and are even having their teams work from home. In an instant, a world that we thought couldn’t get more virtual did just that.

We’re being faced with the new challenge of running our businesses without any face-to-face interactions. How do we stay connected to our clients, suppliers and employees while distancing ourselves from each other for public and personal safety? How do we minimize damage to everything we’ve worked so hard to build?

Related: 8 Negotiating Tactics Every Successful Entrepreneur Has Mastered

The greatest challenges will be around how we renegotiate contracts, resolve conflicts and protect our future. Working virtually can present its own set of challenges, but it can also create a whole new world of opportunities. Below are five tips to help you navigate your way through this public crisis.

The medium matters not

Whether you’re negotiating face-to-face, virtually or via carrier pigeon, the same core principles of negotiation apply. However, you must be mindful of the medium and the impact that it can have. For instance, working virtually unlocks many possibilities that you don’t have when working in person, such as utilizing technology to communicate with other members on your team, accessing information and data incognito, leveraging collaborative tools and even creating more dynamic, visually appealing presentations. That said, if you’re not working in person, it will be more difficult to see and read body language. Therefore, you must be more attuned to listening for verbal signals of flexibility. The point being, don’t let the medium inhibit your negotiation — rather, embrace it and allow it to open up more possibilities.

Related: 7 Ways Women Leaders Can Win at Negotiating

Get curious, not defensive

Requests to change current contracts or to get out of existing obligations are coming your way, if they’re not already there. Your initial reaction to a change request is to assume the defensive position and protect what you have. My advice? Be curious. These are extraordinary times, and while there’s a common theme around COVID-19, don’t assume you know all of the underlying reasons for the requested change. Ask questions. Seek to understand what’s happening in their business and how this crisis is impacting them. The more information you can gather — identifying what’s most important to them — the better you’ll be able to create a viable solution.

Resist the entrepreneur’s need to solve problems

As entrepreneurs, we move quickly. We solve problems. And we take great pride in doing both well. In fact, that’s likely the reason why our businesses are successful in the first place. However, at this moment it’s important to think through how you can give the other party what they’re asking for in a way that’s acceptable to you. This requires you to hit pause and create some space. Instead of trying to find all the reasons to say “no,” find the ways you can say “yes.” Think about what you want and need in return. Just because we’re in the midst of a crisis doesn’t mean that you have to give everything away. Take time to think about your trades.

Related: Coronavirus and a Looming Recession: How to Raise Capital in Uncertain Times

This crisis is only momentary — negotiate accordingly

The changes you make to an agreement in order to address current issues can become the new norm unless you put limitations and qualifiers on the terms that you’ve agreed to. For instance, simple phrasings, like “one-time” or “COVID-19-related,” can help you to ensure that the other side doesn’t come back, post-crisis, expecting your generosity to continue ad infinitum. Instead, you’ll be in a position to limit the changes that were made during an extraordinary moment in time.

Emotions still exist in the virtual world

Much of the conflict you’ll be dealing with is emotionally driven. After all, people are worried about their jobs, taking care of their families and/or saving their businesses. Communicating virtually can sometimes mask underlying emotion. If you ignore those emotions, you could very well be viewed as callous. Worse yet, ignoring them could turn a collaborative conversation into a competitive one. While you might not be able to control the emotions of others, I would encourage you to be mindful of your emotional state. If you’re feeling too close to the issues or too emotionally invested, consider bringing someone with you who’s less attached to the situation’s outcome. They can provide you with perspective and balance.

Related: 10 Tips to Negotiate Like a Boss

With all of that said, minimizing COVID-19’s long-term financial impact while managing at-risk contracts will take discipline, mindfulness and commitment to a vision that extends beyond this moment. But if you put this time to use wisely and incorporate the virtual opportunities presented by necessity, you can come out of this in far better shape than you might have imagined.

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