In recent weeks, news about Covid-19 has dominated headlines and has become even more prominent in the last week as the virus continues to spread. But there is something that has been spreading even more quickly; fear. This includes fear about the economies that have been affected by the coronavirus.
The fact is uncertainty breeds fear. We don’t know how long the impact of the virus will last or how severely it will affect the global economy, but one thing that we can do is look at the outcome of similar events in history. The below table shows a few examples of recent epidemics and how investment markets reacted to them:
| Epidemic | Month end | 6-month % change of S&P | 12-month % change of S&P |
| HIV/AIDS | June 1981 | -0.2 | -10.73 |
| Pneumonic plague | September 1994 | 8.22 | 26.31 |
| SARS | April 2003 | 14.59 | 20.76 |
| Avian flu | June 2006 | 11.66 | 18.36 |
| Dengue Fever | September 2006 | 6.36 | 14.29 |
| Swine flu | April 2009 | 18.72 | 35.96 |
| Cholera | November 2010 | 13.95 | 5.63 |
| MERS | May 2013 | 10.74 | 17.96 |
| Ebola | March 2014 | 5.34 | 10.44 |
| Measles/Rubeola | December 2014 | 0.2 | -0.73 |
| Zika | January 2016 | 12.03 | 17.45 |
| Measles/Rubeola | June 2019 | 9.82% | N/A |
—Source: Dow Jones Market Data
What all these examples have in common is that despite having a short-term correction, all of the impacted markets recovered in a relatively short period of time. We don’t know the long-term market implications of Covid-19, but as Mark Twain famously said, “History doesn’t repeat itself but it often rhymes”.
Investment markets have been pretty complacent due to strong growth in 2019 and before. Thus, it is not entirely unexpected to have a pullback. However, the timing and speed of which is a bit unexpected (magnified by Covid-19).
What we are also witnessing right now is the world’s largest remote-working experiment. Companies are gaining a better understanding of the massive potential of this technology which will propel cloud computing, virtual collaboration software, and productivity to new heights. The long-term effects of this work from home experiment will potentially change how we work forever.
Following are three informative investment articles:
Lessons from past market plunges – and my single biggest regret in reacting to them
Rob Carrick, Globe & Mail, Feb 28, 2020
Lessons from past market plunges – and my single biggest regret in reacting to them
Infection Doctor/Retirement Planner Pontificates on Viral Pandemics
David Graham is both an infectious diseases doctor and a retirement planner, which puts him in a unique position to comment on the economic outlook surrounding coronavirus. It provides an interesting mix of commentary on how to protect yourself from the virus both medically and financially.
Infection Doctor/Retirement Planner Pontificates on Viral Pandemics
Timing The Stock Market Simply Does Not Work
Sam Sivarajan, Globe & Mail, Feb 28, 2020
Timing The Stock Market Simply Does Not Work
General Covid-19 Information:
Coronavirus: A Visual Guide to the Outbreak
Key maps and charts explaining how the Covid-19 virus has spread and how it is being dealt with.
Coronavirus maps and charts: A visual guide to the outbreak
An excellent global dashboard of the Corona virus from Johns Hopkins University
Coronavirus COVID-19 Global Cases by Johns Hopkins CSSE
When we face uncertainty in the markets it is understandably uncomfortable and concerning. Temporary shocks are shocks, but they are temporary. This too shall pass. As always, it is important to have clarity about your time horizon and ensure your investment mix is properly aligned with your goals.
We hope this information helps to ease your concerns. Please contact your advisor if you would like to discuss further.
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Arbutus Financial Team