If you have paid attention to the news over the past few weeks, you may have noticed there has been quite a bit of attention paid to the disease COVID-19, otherwise called the Coronavirus. So, what is this thing?
Research has shown this disease originated in the Wuhan region of China and has spread to many different parts of the world. The quick spread of the virus has caused people throughout the world to show signs of panic. Some going to the extent of crowding the local supermarkets for supplies in case there is a widespread quarantine in effort to contain the disease.
Let’s take a second to look at some numbers to help you put this into perspective. According to the Centers for Disease Control (CDC), Oct 1st, 2019 through Feb 22nd, 2020 there are:
- 32 million cases estimated
- 14 million medical visits for diagnosis
- 310,000 people have been hospitalized
- 18,000 deaths.
These statistics may seem quite frightening, but they are not related to the Coronavirus. These are the latest, low-end, statistics for the Flu in the United States from. (1)
For comparison, the reported statistics for Coronavirus during the same time period are:
- 92,835 people worldwide
- 80,000 of those infections occurring in China
- 3,165 estimated deaths
- 2,900 of the deaths occurring in China (2).
- 60 cases of the Coronavirus within the US resulting in 6 deaths (3).
These are far less infections and deaths than the common flu, so why the added attention?
When there is the discovery of a new, previously unheard of, disease like COVID-19 it tends to get the attention of the news networks. With the prevalence of 24-hour news channels there is a lot of airtime to fill, and these diseases can be just what they need in order to fill much of that time.
We have seen this play out multiple times before. In 2003 there was SARS, 2006 the Avian (Bird) Flu, 2009 Swine Flu, 2014 Ebola 1, 2016 the Zika Virus, just to name a few instances. These all gripped the news cycle and caused many people to fear the worst.
This fear can spill over to the financial markets. Last week the S&P 500 dropped -11.44%, and the Dow Jones Industrial Average was negative -12.26% (4). Much of the selling was in response to the news of this pandemic and its affects worldwide. People see the news and react by selling because of their fear. Often this selling leads to more people reacting and selling and there is a snowball effect.
As with any downturn in the markets there is always the need to take a step back and look at the big picture. These sharp declines can have negative effects on portfolios in the short term, but many investors should be focusing on the long-term. According to JP Morgan Asset Management, going back to 1980, the average intra-year correction for the S&P 500 has been -13.8% while posting positive yearly returns in 30 or these 40 years (5).
It is tough to see these declines and remember that there is often not a reason to panic, especially when you see the negative news each day. But, keeping a long-term focus can help you to get through the rough patches. Something to remember is over the long term you need to stay diversified and disciplined. If that fear is setting in, make sure to contact your advisor to discuss your concerns before making any rash decisions with your hard-earned assets.
We believe the best way to prepare yourself for market volatility like last week is to have a comprehensive financial plan that ties your investment strategy to your long-term goals and a financial advisors that helps you stick to you plan when there is short-term volatility.
If you would like to discuss any of your concerns or build your plan with one of our advisors here at Beratung Advisors feel free to call us at 412-357-2002 or contact us through our website, www.beratungadvisors.com.
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(4) JP Morgan Asset Management, March 2, 2020, Weekly Market Recap
(5) JP Morgan Asset Management, Guide to the Markets, 1Q 2020, Slide 13
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. The information is based on data gathered from what we believe are reliable sources. It is not guaranteed by Waddell & Reed, Inc. as to the accuracy and is not intended to be used as the basis for any investment decisions. The information presented does not constitute a solicitation for the purchase or sale of any security and is not a recommendation of any kind. Consult your financial advisor before making financial decisions. The S&P 500 and Dow Jones Industrial Average are unmanaged indexes which cannot be directly invested into. Waddell & Reed is not affiliated with any other entities referenced. 03/20