Wow! The stock market has officially become a bear market. The Dow has dropped about 30%.

It is hard to believe that just a month ago, we were reaching new stock market highs. This is not like 2008, when the source of the problem was caused by lending money to unqualified people to buy property that was intensely overvalued. The current issue is a health problem that triggered a financial crisis.

We were on an 11-year bull market that was closer to the end than the beginning. The economy was pretty strong, with a record low unemployment rate, although there were some weak links developing. The stock market hates uncertainty and the whole world is full of that right now. This is an unprecedented time, with the number of businesses closing, travel blockages and fear that the world has never experienced. No one knows when all of this will end.

Many business and sporting events have been canceled. We are being told not to meet in groups of 10 people or more.

Social distancing is a term unheard of just a couple of weeks ago. These severe steps are being taken to try to flatten the curve. This means that health-care officials are afraid that hospitals may not be able to handle all of the patients if the virus expands too fast. We have not seen a health event like this since 100 years ago, from the Spanish flu.

By social distancing, they hope to slow the spread. Most people will be able to recover from the virus with rest at home. Authorities are concerned about people 60 and over and those with weakened immune systems.

Ten-year government bonds were earning less than one half of 1%. Why would anyone want to tie up their money that long? The Federal Reserve has taken drastic action to lower interest rates to near zero. It is doing many other things to pump liquidity into the economy. Congress is working on a number of bills to provide financial aid to families and businesses.

The stock market will stop going down once we get control of the virus. Some estimates believe that could take until the end of summer. It will probably take some time to get near the level of the middle of February.

Some economists put the likelihood of a recession at 90%. Department stores and other retailers are closing for long periods, wiping out whole seasons of sales such as Easter and spring. What will happen to all of those goods?

Retailers will be cautious when ordering Christmas items because consumers may curtail spending. Remember, our economy is 70% driven by consumer purchases. Entire industries like airlines, cruise ships and other travel components are being wiped out.

There will be no guarantee that another health crisis could not appear anytime soon. People need to create a financial plan for their family. They need to only invest money in the stock market that is not needed for five years or more. They need to have more emergency money available that is not subject to market risk. While there is never a good time for a market crash, there is a worst time. As we have said several times each year, that is right before or early in retirement. That is when sequential risk could ruin retirement.

Use this learning experience to put your family in a better place the next time the unexpected happens.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.

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