It has been a challenging week for investors.
As of Thursday, February 27, 2020, the three major U.S. stock indices are in negative territory year-to-date. Let's look at the damage:
Dow Industrials -9.71%
Nasdaq Composite -4.53%
S&P 500 -7.80%
The cause? Fear and uncertainty over the global impact of the coronavirus.
The headlines are frightening, the posts on social media are scary (and probably riddled with incorrect information, but that's whole different issue), and the responses from elected officials are unsatisfactory.
For investors, your age, experience, and the total value of your portfolio are irrelevant because nearly 100% of you are thinking the same thing: This. Doesn't. Feel. Good.
Take a deep breath. And another.
It's all going to be okay.
How Have Other Diseases Affected Financial Markets?
This afternoon I spoke with a friend who works in public health. She's highly-educated and very smart. In other words, she knows what she's talking about when it comes to these types of things.
Part of our conversation focused on previous epidemics/pandemics and their affect on financial markets. The chart above might be difficult to read, so here's a link to a larger version. When viewing the larger chart, you can see a host of pandemics/epidemics and, most important, the macro trends in the S&P 500. However, it's impossible to see the micro trends, so I had to do some digging:
During the height of the SARS virus back in 2003, the S&P 500 Index fell by 12.8%
During the Zika virus, which occurred at the end of 2015 and in 2016, the market fell by 12.9%
My point is that during previous pandemics/epidemics the financial markets suffered some scary declines. The important takeaway is that markets recovered relatively quickly.
Some Perspective
If you want some statistics about the coronavirus check out this site, which aggregates statistics from health agencies across the world. Some numbers to consider:
At the time of this writing, there were 83,379 coronavirus cases and 2,858 deaths
Every year an estimated 290,000 to 650,000 people die in the world due to complications from seasonal flu viruses
I'm not attempting to minimize the threat posed by the coronavirus or the deaths that have occurred. I simply want to give you some perspective about this issue.
So, get a flu shot, wash your hands, eat well, exercise regularly, and don't forget to breathe.
If you're still nervous about the coronavirus and how it might affect global markets and your portfolio, that's okay. Just keep the big picture in mind when thinking about this week's declines:
One Last Thought
In the movie Braveheart, there's a scene where English heavy cavalry are bearing down on William Wallace, played by Mel Gibson, and his army of Scottish warriors. It would be truly terrifying to have heavy cavalry charging at you. In the movie, Wallace/Gibson tells his soldiers to "HOLD".
I recommend you do the same when it comes to investing. Keep calm and stick to your financial plan.
Listening / Playing / Reading / Watching
Here's what has my attention this week:
Pandemic by Z-Man Games. This is a great cooperative board game where up to four players try to keep the world safe from outbreaks and pandemics.
Outbreak starring Dustin Hoffman and Morgan Freeman.
