Coronavirus and the Markets

To our clients and associates,

On Friday, January 17 – after a spectacular 40% run that started the day after Christmas, 2018 – the Standard & Poor’s 500 Stock Index closed at 3,329.62.

Two weeks later to the day – Friday, January 31 – the index closed a little over three percent lower, at 3,225.52 due to fears of the Coronavirus.

This has been a horrific disease for the people affected. We are hearing reports of China rounding up people who forgot to wear a mask. Travelers are being quarantined in airports and on cruise ships for weeks at a time. There just seems to be no end to the negative news surrounding this terrible outbreak.

Yet, in the U.S. alone, there have been 19 million cases of the flu, 180,000 hospitalizations and 10,000 deaths – just this season so far! I believe it’s the nature of a foreign and unknown contagion that creates fear among us.

You may be wondering how these types of outbreaks affect markets. Let’s take a look at the historical impact of some outbreaks on the S&P 500:

The chart below displays the MSCI World Index in times of outbreak.

The above is from sources believed to be reliable. Please remember that past performance is not indicative of future performance. Loss of principal and/or loss of portfolio value are possible.

As you can see, the effect on both US and global markets is in line with regular market cycles.

Again, I don’t want to downplay the severe loss of life or the impact that curtailing trade and international travel has on the world’s economies, but for those with a long time horizon in the market, it is our best advice to be patient and ride through the difficult times.

All my best,

Al Wooster

Past performance is not indicative of future performance. Loss of principal and/or loss of portfolio value are possible.