Coronavirus Effect on Markets March 1, 2020

By Daniel Cohen | March 1, 2020

We’re sharing one of the messages we recently sent to our clients and we thought this information would be generally helpful, keeping in mind the dynamic coronavirus situation.

There has been a lot of concern this week about the coronavirus that started in China last year. Every day, there have been news reports of this outbreak spreading throughout the globe. The rapid flow of news along with the uncertainty of the length and severity of the situation has caused the markets to pull back this week.

We have been actively monitoring the global situation and its effect on the economy and the markets. The Center for Disease Control and Prevention (CDC) at cdc.gov is an excellent resource with official information updated regularly. That site along with many respected print and online news sites provides reliable data to help you stay informed.

According to the CDC, the coronavirus is capable of traveling through the air but only a few feet, unlike other pathogens that can remain airborne up to 100 feet. Therefore, the infection rate is only slightly higher than the seasonal flu or the common cold. The fatality rate for the coronavirus is estimated to be around 3% which is only slightly higher than the seasonal flu. The SARS epidemic of 2003 had a 10% fatality rate, and the Ebola virus of 2014 had a nearly 50% fatality rate.

Although the weekend’s news is focused largely on the rise in cases in South Korea and elsewhere, what is notable about China is that, as the Wall Street Journal and other media report, of the 80,000 cases of coronavirus in that country, nearly half or 39,000 patients have recovered from the disease. Of those 80,000 total cases, there have been 2,835 deaths or 3.5%. More people have recovered from the disease than still have it and hopefully this trend will continue.

China is sharing their knowledge of treating their patients with officials in other countries to attempt to reduce the fatality rate and improve treatment. These actions have slowed down their economy as people were forbidden to leave certain cities and most businesses were temporarily closed. Steps like this are welcomed to help save lives and prevent spreading infections.

The economic disruption will only be temporary and the markets have always recovered as business returns to normal. MarketWatch has published results of studies on the markets during global epidemics like SARS in 2003, Avian flu in 2006, Swine flu in 2009, MERS in 2013, Ebola in 2014, and Zika virus in 2016. All saw temporary negative market responses but six months and twelve months after the outbreaks passed, the markets were always higher.

We’re encouraged by the news out of China that nearly half of their patients have recovered. We don’t know if the worst is behind us yet, and some worry that the information coming from China may not be accurate. Either way, we will be watching and responding. When making investment decisions, it is important to focus on long-term expectations and avoid letting short-term disruptions derail those decisions.

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