Expert: In the midst of the pandemic, it's important to be clear with investors

COVID-19 creates uncertainty among investors, businesses limiting forward-looking information.

June 8, 2020
Contact: Pate McCuien, 573-882-4870,

The views and opinions expressed in this “for expert comment” release are based on research and/or opinions of the researcher(s) and/or faculty member(s) and do not reflect the university’s official stance.

This is an image of Keith Czerney

Keith Czerney is a MU assistant professor and Deloitte Faculty Scholar.

Renowned Mutual Fund Manager Peter Lynch once famously said that “Everyone has the brainpower to make money in stocks. Not everyone has the stomach.”

The past few months have tested the intestinal fortitude of even the most sanguine investors, as the markets have appeared to be in a free fall, only to spike on news that in other times would barely register in the national conversation. Keith Czerney, University of Missouri School of Accountancy assistant professor and Deloitte Faculty Scholar, says that in a time where no one knows what is next to come, clear and trustworthy information is extremely important.

What should investors do?

The current market volatility has been exacerbated by the timing of the pandemic — striking after most year-end financials were filed with the SEC. To combat the volatility, which makes themarket very difficult to read, Czerney says investors should look to the past for reliable information about the future.

“I think it is important for investors to discern between, to the best of their abilities, that which is information grounded in fact, and that which is simply noise or speculation,” Czerney said. “There is so much being communicated in the financial media during this time of high uncertainty. I think information conveyed by members of management that have a strong track record of transparency and well-intentioned remarks is going to be the most reliable for investors.”

What should businesses do?

As businesses venture into unknown waters, it can be difficult to provide forward-looking information that can be helpful to potential investors. While it is beneficial for firms to project forward, Czerney says to be very specific about the source of the information.

“First, firms must follow the disclosure regulations set by the SEC, but management should also clearly delineate that which is fact, based on historical events, and that which is uncertain and/or forward-looking,” Czerney said. “Lastly, when events that negatively impact the company do occur, management should disclose these events in a timely fashion to the market.”

Why have the past few months been particularly hard on investors?

Many of the effects of COVID-19 in the United States began in mid-March. Investors knew the pandemic would have an impact on the economy, but they didn’t know any specifics until companies reported first quarter earnings. They weren’t able to discern how exactly the event impacted businesses because they were in the dark for nearly a month after the pandemic hit.

“From February to April, we didn’t really hear much from companies in terms of their required financial reporting information because they haven’t had to say anything,” Czerney said. “Investors were left to digest information from news outlets, so there was some confusion.”

Additionally, the quarterly reports covered a time span that began a month or two before the pandemic really started affecting businesses, meaning the reports do not show the full scope of how detrimental the pandemic has been. Furthermore, many firms also decided not to release earnings guidance that normally come in the quarterly reports.

“Though the first quarter reports helped, I think the biggest hurdle the market faces right now is that we don’t have this guidance, and we don’t have these forecasts from management about how they see their firm being affected.,” Czerney said. “So now the market is still in a position where people need to make their own assessments of how the pandemic is unfolding.”

What are the long-term effects of the pandemic on the marketplace?

Businesses are still disclosing how COVID-19 is affecting them, but they lack the ability to provide accurate forecasts. With the lack of this information, it has become extremely difficult for the average investor to know the best place to put their money. Because of this, there is a growing frustration among this group as investment bankers and Wall Street analysts are continuing to make money. Czerney says that the general public is also growing increasingly frustrated as the market is fluctuating rapidly.

“In early April, the market had its best week since 1974 at a time when there was then record unemployment and COVID-19 cases were still on the rise,” Czerney said. “People struggled to understand the apparent disconnect between how the stock market was behaving and the dire economic outlook.”

Subscribe to

Show Me Mizzou

Stay up-to-date with the latest news by subscribing to the Show Me Mizzou newsletter.