It’s been a difficult week in the market. We saw the biggest, one-week sell-off since 2008. The elephant in the room is the Wuhan coronavirus. But somewhere on the periphery sits the reality that the market probably needed an excuse to cool off from its epic run of 2019.
We don’t claim to have any idea how far this outbreak will spread, nor how many lives it will claim, before it is brought under control. We are reasonably certain that many (or perhaps most) of the world’s leading virologists and epidemiologists are working on it. It’s our opinion, but we believe that their efforts will ultimately succeed.
If we go back in time to similar outbreaks in this century, it’s a reasonable opinion. Just consider the following:
- 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
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), the S&P 500 closed at 2,954.22 on Friday, an increase close to 3.5 times higher. I’m confident that you see where we’re going with this and why we consistently discuss developing a plan and asset allocation model that will allow us to remain consistent through any market environment.