Treating An Ailing Economy – Part 3: Our Responses

So far, we have only looked at the monetary policy response and the fiscal policy response towards the COVID-19 pandemic.

So far, these policy responses are merely treating the symptoms of the ailing economy.

It is like the doctor who prescribes paracetamol for your fever and antihistamines for your running nose. The root cause of your illness, the flu virus is still causing you the illness. The medicines will temporarily help relief your symptoms and make you feel a little better.

In order to get better, you will need to abstain from working, rest more and drink plenty of fluids. That is key to help your body recuperate and your immune system to get rid of the virus in your body.

For part 3, let us look at our responses, mainly:

  1. Government responses
  2. Our collective responses as a society
  3. Our investment portfolio

Government Responses

A lot of the government responses – travel bans, shelter in place, lockdowns, cancellation of public events may be detrimental to the economy but it focuses on containing the spread of the virus which is the real root cause of the crisis.

Source from

The chart above shows the different responses from each governments and the length shows how long it took from the 1st case to 1000+ cases.

What I want to show is that government response matters and if they reacted quickly in the early stages, the country is able to prolong the rate of cases escalating to 1000+. Travel bans, closure of public events, restrictions of internal movement did well in containing the spread in many countries.

Some countries however, implemented them later than others which caused their rates to increase very rapidly. For example, US and Japan had their first case 21 days since the Wuhan outbreak. However, Japan took action earlier and closed schools. Whereas, US had a varied approach – some states put shelter in place really early, e.g. California whereas some states implemented them much later, e.g. New York, where it is now the current epicenter of the outbreak.

One point to note. The data source is the total number of confirmed cases, so it does not mean if the length is short a particular country might be doing well. There is a possibility of under reporting or inadequate testing that decreases the total case reported.

Here is another visualization of the lockdown of countries globally.

Our Collective Responses As A Society

The Asian countries which were plagued by SARS few years ago had clamped down the hardest and swiftest since the beginning of the outbreak.

Singapore, Hong Kong, Taiwan and South Korea had been hailed as shining examples of how effective they are at containing the spread early on. The governments immediately applied restrictions, executed contact tracing and rampped up medical equipment, medical facilities and staff to respond.

The people in these countries also knew about social distancing, staying at home when sick, washing hands and basic hygiene. They complied with government orders as they had already been through a painful SARS outbreak and came out wiser from it.

However, in the recent weeks, there has been a resurgence of new COVID cases due to reimportation of disease from abroad.

As a resident of Singapore, I did see a period in the last few weeks where people became complacent and relaxed a little. It started with people breaking their quarantine, attending dinners, going out in small groups and attending events.

Although the government has been nagging on and on about social distancing, the people still crowded closely in popular places and continued to frequent malls and entertainment places.

Hong Kong is taking staying at home more seriously compared to Singapore

As a result, Singapore soared up to ~1,300 cases prompting the government to accelerate measures to contain the virus – implementing schools closure, closure of non-essential workplaces and public areas and a strict stay at home / work from home notice.

The school closures will be a pain as I will be dealing with two kids this week onward while working from home. So I better take this chance to publish one more post while I still have time (and peace).

My point is to do our part in combating this virus, we need to be vigilant and actively observe social distancing.

Singapore is not in a total lockdown yet. If you want to get an idea of what a real lockdown looks like just look at the data of Italy below as a comparison.

Only -28% decrease in retail and recreation in Singapore compared to -94% in Italy which is a real lockdown

The government, central banks and businesses have been doing their best to provide some support during this period (monetary policy and fiscal policy), we also need to do our part, which is the most important of all – stay at home.

This is the best way to cure this health crisis as it addresses the root cause – prevent the spread of the virus.

When the doctor prescribes medicine to relieve your symptoms, you will need to do your part to rest at home, drink lots of fluids and let your body recover – there is no other cure.

Our Investment Portfolio

The health crisis had triggered an economic crisis. As a result, my portfolio has not been pretty for the past few weeks. However, there are a few key takeaways that I have learnt from this.

#1 Diversifications Does Not Always Work

Diversification does not always work, especially during the times when you need it the most – when the market crashes.

At times like this, correlation between assets that are normally uncorrelated increases and they fall together with stocks.

We see it in bond vs stocks. We see it in international vs us stocks.

That said, a well diversified portfolio does not protect you from downsides, but it could reduce the losses of your total portfolio.

#2 Discover Your Risk Tolerance

During a bull market, the more risk you take, the higher return you will expect. This is commonly accepted. Hence, the more risk, the better.

However, during a bear market, the higher risk you took, the larger your losses. It is during bear markets like these, that you suddenly understand the meaning of risk – you stand to lose more, much more.

If seeing your portfolio drop makes you nervous, you may want to reconsider your asset allocation. Maybe your portfolio is too aggressive for you. On the other hand, if you were unfazed, you may consider allocating more into equities.

Another way to cope with the panic is to slow down and tune out the news. The more frequent you review the market data, the more likely you will suffer from myopic loss aversion, which means you are extra sensitive to short term losses. Going through the market crash will be less scary, if you do not know about it.

Otherwise, you could also get a financial advisor who will be there to provide support and keep you focused on the long term, bigger picture. Think of it as a coach that will keep you doing your daily drills and keep you from doing anything reckless that may injure yourself.

#3 Saving Is More Important Than Investing

The reason why I was not panicking during the market crash is also because I had adequate savings accumulated over the years.

This extra stash of emergency cash gives me a sense of security knowing that I could always draw from it if I need cash urgently.

The other extra benefit is that having cash saved up gives you holding power – the ability to stay in the market and not having to sell off my investments to raise cash.

The moment you sell off your investments, you realized your losses. If you hold on to your investments, they remain as assets that may grow in value in the future.

Thus, a guideline for me when investing is only invest the money that I can afford not to use for the specified time period. Hence, this ensures I will buy and hold on to it as long as I plan.

I also refrain from timing the market – selling off at the peak and buying at the bottom – because I do not know how to consistently predict the bottom. Hence, whatever cash that I have earmarked for investments, I continue to buy into the market. If you cannot predict the bottom, just continue dollar averaging.


This health crisis has turned our lives upside down. Governments and central banks have gone all out doing all they can to sustain the economy.

We also have to do our part in solving this crisis. We need to exercise social distancing, stay at home and stay healthy. Nothing is more important now that containing the outbreak.

As we experience drastic changes in our daily lives, as we experience scary market volatility, let us continue to stay focus on the long term and continue with your investment plan.


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