At the time of this writing, the Centers for Disease Control (CDC) warned that Coronavirus (COVID-19) is likely to spread in the U.S. Right now, companies and the analysts that follow them are trying to figure out the implications of Coronavirus and the impact it will have on their businesses. Companies producing and selling products in China have indicated that growth is slowing in that market. All of this brings an increased level of uncertainty into the markets and the press will of course capitalize on this at every level, and there is some genuine uncertainty.
In relatively recent times, there have been a number of viruses that gained global attention, starting with SARS in 2003, followed by the Avian flu in 2006, Swine flu in 2009, MERS (which is a Coronavirus) in 2013, Ebola in 2014, Zika in 2016, and now COVID-19. The flu that actually reached pandemic criteria was the Swine flu, which started in early 2009 and lasted until late 2010. It was estimated that more than 700 million people globally contracted the virus and that it caused over 200,000 deaths. The global stock markets basically shrugged off the event as they started to rebound from the recession and financial crisis we experienced from 2007-2009.
CBS Marketwatch posted stock market returns during these different events. Most of the flu events had some short-term impact on the equity markets, but very little impact over periods that were six months or longer. What might be different this time (from the Swine flu) is that the equity markets are at or near all-time record highs. Investors could feel tempted to take profits, causing prices to decline further. In comparison, in 2009 the worst was already over, and recovery momentum was difficult to stop.
At this point, nobody knows how many people will end up with Coronavirus, how long it will last, or what the financial impact will be. We do know that it could change very quickly and that markets will react just as quickly. Our investment philosophy is not based on trying to guess the outcome. We will rely on judicious rebalancing in the weeks and months ahead and we believe this too shall pass. We’re reasonably certain that many (or perhaps most) of the world’s leading virologists and epidemiologists are working on it and in time, they’re very likely to succeed as they have in the past.
In the interim, please know that we are on watch and following this closely. If you have any questions, please contact your Beaird Harris wealth manager.
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