Market Update – Coronavirus & Market Declines

As I am writing this, the Center for Disease Control (CDC) warned the 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 what the implications of the Coronavirus is going to have on their businesses. Companies producing and selling products in China have indicated that growth might slow in that market. The press is capitalizing on the event adding to the fear that investors can feel when times begin to look more uncertain.

There have been a number of viruses that have 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 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 had contracted the virus and it had 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 6 months or longer. What might be different this time from the Swine flu is that the equity markets are near all-time highs. Bad news could incline investors to take profits, causing prices to decline. 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 the Coronavirus, how long it will last, or what the financial impact will be. We do know that it could change very quickly, and the markets will react just as quickly. Our investment philosophy does not warrant itself to guessing the direction of the market, but we will take advantage of movements in the market by rebalancing the portfolio as the different asset classes react to current news. Please contact your Petersen Hastings advisor if you want to review your portfolio or investment strategy.

Scott Sarber, CFP®, AIF®

CEO & President