Coronavirus and Market Update

By David K. MacLeod, CFP®, CFA

Stocks dropped sharply on Monday as the novel coronavirus, COVID-19, continued to spread. With more than 2,000 confirmed cases outside of China now, there’s concern that the virus will go a lot further than the SARS virus did in 2003.

Of primary significance are the individuals and families directly affected by the virus. Considering the financial effects, there’s now more uncertainty about economic growth and the potential hit to corporate earnings. The markets don’t like uncertainty, and we think this led to the stock market decline on Monday.

Compared with 2003, it’s possible that the duration and dispersion of this virus will be longer and wider. But there are also relatively good signs in the data. The fatality rate is currently much lower (2% compared with 10% in 2003). And four out of five confirmed cases show only mild symptoms. Unlike the flu pandemic in 1918, fatality rates are significantly lower for children and otherwise healthy adults.

As these episodes have played out in the past, eventually we expect to hear reports of declining numbers of new cases, although some models don’t predict a decline in the total number of cases until sometime around the middle of this year.

We’re continually monitoring the latest developments, and we don’t recommend any changes following the recent stock market decline. As always, please let us know if you anticipate needing cash soon from an account we manage.