The Coronavirus, COVID-19, headlines have been disconcerting, and any loss of human life is scary. The unknown is always scary, so historical perspective and broader context are helpful resources. But first, given the market volatility attributed to this latest viral outbreak, I wanted to reiterate a point we make in each and every economic commentary—market swings are always expected, we just can’t predict the source or timing. It’s why we believe, your plan and portfolio should be built with the expectation for volatility… so there’s no need to react to news headlines (financially speaking) if your personal headlines haven’t changed.
Now, let’s get to the points of historical perspective and broader context…
1. During the 2019-2020 season there have been 15 million flu cases, 140,000 hospitalizations, and 8,200 deaths in the US alone. The scope of the annual flu season is dramatically more impactful than COVID-19. You’d think those numbers would create ominous headlines! Instead, news sources latch onto any novelty to which audiences haven’t already been desensitized.
2. According to Worldometer, an aggregator of statics from health agencies across the world, the number of active cases (confirmed cases minus recoveries and deaths) of COVID-19 has actually been declining over the past week. As of March 1, there were 40,417 active cases in the world, a 30% decline from the peak on February 17th. Far more people have recovered than not.
3. A vaccine for COVID-19 is approved to begin human trials by the CDC. This step is 17 months faster than the vaccine developed for the SARS outbreak in 2003, and is a powerful testament to advancements in medical technology.
4. Six viral outbreaks in the new millennium have all resulted in negative stock market reactions. In the outbreaks with the worst market volatility, SARS in 2003 and Zika in 2015/16, the S&P 500® fell 12.8% during the former and 12.9% during the latter. It's notable that both are near the average annual intra-year decrease of the S&P 500® which is 13.9% since 1980, virus outbreak or not. Here is a chart pulled directly from a February 25th CNBC article tracking the S&P 500 for each outbreak: click here.
Emotionally, the loss of human life is deeply unsettling, yet there is some peace of mind in keeping perspective. So, be practical… wash your hands frequently, stay educated, and don't be alarmed by headlines.
This newsletter contains general information that may not be suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this newsletter will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.
Sources: Zack’s Investment Management 4 Market Forecasts for 2020 January 6, 2020, cnbc.com Investors are Running for Cover. Can Stocks Bounce Back? February 25,2020, First Trust Time To Fear the Coronavirus? February 25, 2020. https://www.worldometers.info/coronavirus/
March 2, 2020. This post contains links that direct you away from 994group.com for educational and convenience purposes. 994 Group is not responsible for any errors or omissions on outside websites.
S&P 500®: The S&P 500® index is an unmanaged index of 500 companies used as a representative sample of the United States economy. The S&P 500® index consists of only stock holdings. Indices are not available for direct investment and do not reflect any fees that may be charged.