WHEW! I think I have whiplash after this week. I’ve been an advisor for a very long time, and I’ve never seen anything quite like this. BUT, there have been a number of short-term periods in the market that have been similar. Two of the most recent are SARS and Zika. And while past performance isn’t a guarantee of what will happen to the market after Coronavirus stabilizes, if we look over history, we can begin to see a pattern.
Recent history with stocks and viruses is that markets overreact leading to significant buying opportunities along the way. Over a 38-day trading period 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 into 2016 the market fell by 12.9%. There are other examples, but they all passed, and the market recovered and hit new highs. Will this happen again? Our view is that it is highly probable.*
So, why the drastic up and down see-saw this week? Individual and institutional investors couldn’t really reconcile the BAD news of the spread of the virus with the “good” news of Biden’s Super-Tuesday win and the Democratic race narrowing. Biden is widely considered a more moderate candidate than several of the others, and more moderate candidates are considered more economically favorable.
And, what’s ahead? I wish I knew. But if this health crisis is like almost ALL of the others (with the exception of the HIV/AIDS Crisis) the period of time following the initial period of panic will be good. You can see why I feel this way by downloading the comparison HERE. As you can see:
6-month change of the S&P 500 Index following the start of the epidemic was positive in 11 of the 12 cases, with an average price return of 8.8%.**
12-month change of the S&P 500 Index following the start of the epidemic was positive in 9 of the 11 cases*, with an average price return of 13.6%**
This is why I DO NOT advocate selling out of fear. This is, however, a GREAT time to buy! And, any dividends and interest that you get that reinvests during this time will buy you more for your money.
An update on eMoney: As you may know – we started a major upgrade to that software at quite possibly the worst possible time, but once we started, we had to finish it. What does that mean to you? Logging in to view your accounts on eMoney you might still be experiencing:
- Problems logging on
- Duplicate accounts showing
- Missing accounts
We are proactively reviewing all accounts daily to resolve these errors. Please email firstname.lastname@example.org if you notice these things and we’ll make a note of it. If you have issues with logging in, she can also help you.
I know this is a scary time in the market and in our economy. I’m always here if you need me!
*First-Trust Economic Report, Time to Fear Coronavirus? 2/25/2020**First-Trust Epidemics and Stock Market Performance since 1980