We are following up with the latest information regarding the impact of the Coronavirus on the markets and the economy. As we noted in our past updates, markets dislike uncertainty. The daily volatility we are seeing is driven primarily by the following factors:

  • Poor coordination and communication of the effort by Washington to combat and contain the outbreak
  • The unknown impact on domestic and global economies (This is the main one.)
  • The fueling of hysteria by social media and cable news outlets

Investors should take some comfort in the historical record of epidemic outbreaks and their short-term impact on markets and the economy. Take a few moments to look at the chart below on the history of epidemics and the markets. It will give you both comfort and perspective – something everyone could use:

In the meantime, please reflect on the following points:

  • Diversified portfolios are seeing far less fluctuation than the stock market itself. As of this writing, the S&P 500 is down about 16% YTD. A typical balanced portfolio is down about 8%.
  • Portfolio fluctuations are within the range we would expect to see.
  • The financial plans we produce for clients have times like this baked into the results. We expect them. If you were on track for success a month ago – you’re still on track.
  • As more concrete information becomes available and containment efforts take effect, we expect to see a reduction in the daily volatility.

As for what to expect in the coming days and weeks, there will likely be mixture of good news and bad – progress and setbacks. Markets will continue to respond accordingly. But – this will end. The reports from China suggest that containment efforts have been successful. In fact, US News and World Report reflected today that more than 60,000 people have fully recovered from the virus there.

As for what people should do now:

  • Resist the temptation to get your news from social media. It’s invariably inaccurate and only creates more hysteria and confusion. Everyone on Facebook and Instagram who was a Constitutional scholar last month is now an infectious disease expert. Ahem.
  • Don’t be disturbed by the closing of colleges for two weeks, cancellation of large gatherings, etc. While disruptive, these are exactly the containment efforts required to minimize the spread of the virus.
  • Follow the suggested protocols for good hygiene.
  • Just breathe. This will all work out. It always does.
  • Don’t cancel your summer travel plans just yet. Americans are still allowed to travel both here and abroad. (Last nights Presidential address suggested all flights from Europe are banned for thirty days. This is factually inaccurate. The President’s Proclamation bans the entry of foreign nationals who have been to certain European countries during the last 14 days. American citizens are exempt. (Visit the US Dept of State’s website for more information.)

Lastly, don’t hesitate to call us if you need to talk. That’s what we’re here for.  We will provide another update when we have additional progress reports.  And don’t forget to wash your hands!

Your First Coast Wealth Advisors Team