The Coronavirus, which is currently dominating the headlines, is a viral outbreak originating in the Chinese City of Wuhan and spreading across the globe. While much still remains unknown about the virus, it has certainly had a negative effect on the stock market; wiping away most of the gains from the beginning of the year.
The downward movement in the market has been driven by fears that the outbreak will slow the Chinese economy and the negative spillover will put a damper on the U.S. and global economy as well. The true long-term effects on the markets will remain a question mark for some time, but investors should note that this is not the first viral outbreak to negatively hit the markets with varying magnitude as outlined below.
If Coronavirus follows the same pattern as past viral outbreaks, which have resulted in a market downturn, then rapid recovery following containment has been the precedence. There have been no sustained market declines as a result of a disease outbreak in the modern era.
It should also be noted, to put events in a better perspective, the number of victims from Coronavirus (17,300 diagnoses and 362 deaths worldwide as of Feb. 3, 2020), compared to the latest flu season just in the U.S. (over 19 million diagnoses and over 10,000 deaths) shows that caution should be used to not overestimate the impact that the virus may have.
In conclusion, while it is impossible to predict the extent that any virus may spread compared to past outbreaks, we are certainly closely monitoring the effects the Coronavirus has on the market, and are prepared to take action in client portfolios if necessary. However, we continue to urge caution to avoid overreacting to media reports and short-term market reactions, particularly when investing with a long-term objective.
This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from this usage.