Broker Check
Coronavirus and the Stock Market

Coronavirus and the Stock Market

| February 10, 2020

Welcome to the new decade! There is a lot to be excited about with the New Year but at the very same time, there will be no shortage of drama that awaits your investment markets! The impeachment trial started to get warm but quickly fizzled out and so did the political headlines. In a few months, election risk is very will rise as we inch closer to November and volatility may be in store. But let's put that off for now and just focus on our current plate of issues: the Coronavirus. This new virus is certainly causing sickness, as evidence of January's volatility. While we all wait for more concrete answers, the question I was asked recently in a client meeting was ‘what kind of lasting affect’ will this new flu have on the stock market?

I spent some time and reviewed past epidemic/pandemics over the last 30 years and they are listed below. My overall takeaway was that while all new diseases created short term volatility and disruption, the markets almost always returned to normalcy within 6 months. See below. (1) 

Epidemic

Month Discovered

 

6-month % change of S&P

 

12-month % change of S&P

 

HIV/AIDS

June 1981

-0.2

-10.73%

Pneumonic plague

Sept 1994

8.22

26.31

SARS

April 2003

14.59

20.76

Avian flu

June 2006

11.66

18.36

Dengue Fever

Sept 2006

6.36

14.29

Swine flu

April 2009

18.72

35.96

Cholera

Nov 2010

13.95

5.63

MERS

May 2013

10.74

17.96

Ebola

March 2014

5.34

10.44

Measles/Rubeola

Dec 2014

0.2

-0.73

Zika

Jan 2016

12.03

17.45

Measles/Rubeola

June 2019

9.82

N/A

 

 

 

 

 

Source: Dow Jones Market Data

 

 

 

 

 

 

 

AIDs/HIV was an exception to the rule. This epidemic had more than a 12 month hangover on the stock market, which could be correlated to the incurable nature of the disease. However, almost every other one was short-lived as seen on the graph above.

To conclude, I don't have a clue as to what extent this virus or "pandemic" will spread, where it will spread to and don't know the economic aftermath it will have; only time will tell. 

Keep an eye out for announcements of a vaccination for Coronavirus! The most brilliant minds in the world are working on it.

Make it a great week!

-Patrick.

footnotes:

(1) https://www.marketwatch.com/story/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22

(2) https://www.seeitmarket.com/coronavirus-historical-stock-market-performance-with-pandemics/