Coronavirus and Your Wealth Plan – a Rational Perspective

Feb 5, 2020 2:47:00 PM / by Jonathan Blau

 

As we enter the new decade, the media catastrophists continue to aid investors in allowing, even encouraging, human nature to destroy their investment plans and wealth with the sensationalized “reporting” on the Coronavirus.On Friday, January 17 – after a dramatic 40% runup that started the day after Christmas 2018 – the Standard & Poor’s 500-Stock Index closed at 3,329.62.

Two weeks later to the day – last Friday, January 31 – the Index closed a little over three percent lower, at 3,225.52. (more than half that damage was done on Friday.) Financial media wants us to believe that the blended value of 500 of the largest, best financed, most profitable businesses in America and the world has “lost” three percent – with more “losses” to come – due to the outbreak in China of a new strain of Coronavirus. Experience and history cause me to doubt this, and I suggest that you – as goal-focused long-term investors – join me in doubting it.

I don’t have any idea how far this outbreak will spread or how many lives it will claim, before it is brought under control. Many of the world’s leading virologists and epidemiologists are working on it, and I believe that their efforts will ultimately succeed. This is nothing more (or less) than my personal opinion, but viewing the history of similar outbreaks in this century as a guide, this would seem to be a reasonable hypothesis.

I draw your attention to:

  • SARS in 2003-04, also originating in China

  • The bird flu epidemic in 2005-2006

  • In 2009, a new strain of swine flu

  • The Ebola outbreak in the autumn of 2014

  • The mosquito-borne Zika virus outbreak in 2016-17

The super-spreader of SARS – a fish seller – checked into a hospital in Guangzhou on January 31, 2003, basically infecting the whole staff. The epidemic exploded from there.

On the first day of the SARS epidemic, the S&P 500 closed at 855.70. Seventeen years and six epidemics later (including the current one), this past Friday the Index closed close to four times higher. I’m confident that you see where I’m going with this.

As always, I welcome your inquiries around this issue. In the meantime, the best and healthiest investment advice I can offer would be that you turn off the television set.

In closing, please always remember Fusion’s credo: All successful investing is goal focused and planning driven. Successful investors are continuously ACTING on a plan. All failed investing is market focused and performance driven. All failed investors are continually REACTING to the news, current events and the market.

p.s. The history of the SARS epidemic, and of most if not all the others before this one, is very well documented by Wikipedia. The closing level of the S&P 500 on 1/31/2003 is from Standard & Poor’s, as reported by Yahoo Finance.

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Written by Jonathan Blau