By SJS Senior Client Portfolio Manager Tom Kelly, CFA
Human beings have incredible resilience. When facing obstacles, humans tend to find solutions and persevere, often growing stronger from the experiences.
One recent obstacle is the coronavirus (officially known as COVID-19), an infectious virus that began in Wuhan, China in December 2019.[1] As of February 24, 2020, the coronavirus has affected roughly 80,000 people, resulting in roughly 2,600 deaths. More than 77,000 of these cases – and all but 23 deaths – have occurred in China.[2]
There is significant optimism among infectious disease health experts that the coronavirus will be contained relatively soon. Researchers globally have examined the genome of the coronavirus and have discovered the corresponding infectious proteins.[3] Governments and agencies around the world are considering ways to potentially slow down the spread of the virus, instituting travel procedures and other preventative measures. Additionally, leading global health agencies, including the World Health Organization, and major pharmaceutical companies are devoting tremendous resources to develop vaccines and treatments.[1]
In the past 100 years, the world has experienced many sudden infectious health diseases, including the West Africa Ebola epidemic in 2014, Swine Flu from 2009-2010, SARS in 2003, and the Spanish Flu from 1918-1920. Some of these sudden diseases were significantly greater in magnitude and severity than the current coronavirus. During these past periods, global stock markets experienced some short-term volatility that had little to no significant effects on intermediate- or long-term returns.[4]
Much of the short-term volatility in these past periods is consistent with general market movements, making it difficult to determine if these sudden infectious diseases even caused significant movements in the stock market in the first place.
Additionally, high-quality bonds have experienced little volatility during these periods, and have often increased in market value as investors moved money into safer bond investments.[5]
The stock market, general economic conditions, and societal health trends are a few of the forces that are in constant flux. You may find refuge in knowing that while utilizing our MarketPlus Investing® portfolios, we have worked with you to design low-cost portfolios diversified across many countries and asset classes that we believe can withstand and grow from these uncertain forces. (Diversification does not eliminate the risk of market loss.)
Your team at SJS continually monitors current and historical influences, forms judgments and, in turn, makes decisions about portfolio adjustments, tax saving strategies, and estate and legacy recommendations. We spend our time studying and following these developments, so you don’t have to.
SJS believes in the resilience of people and markets to respond well in the face of new obstacles, with the current coronavirus as no exception. Thus, we recommend you continue to rely on MarketPlus Investing to stay invested in your well-diversified global portfolio true to your goals and risk tolerances. Further, you may take solace in knowing that short-term market volatility typically allows us to rebalance portfolios in more tax-efficient ways that may improve your long-term investment experience.
If you have specific questions or concerns, please call us. We’re always here to explain and assist.
Sources:
[1] “Q&A on coronaviruses (COVID-19).” World Health Organization, who.int.
[2] “Coronavirus disease (COVID-2019) situation reports.” World Health Organization, who.int.
[3] “How Bad Will the Coronavirus Outbreak Get? Here Are 6 Key Factors.” Knvul Sheikh, Derek Watkins, Jin Wu, & Mika Grondahl, New York Times. February 7, 2020.
[4] “How Will Coronavirus Affect Your Portfolio?” Nick Maggiulli, Of Dollars and Data. February 11, 2020.
[5] In US dollars. Source: Dimensional Fund Advisors, using data from Bloomberg LP. Includes primary and secondary exchange trading volume globally for equities. ETFs and funds are excluded. Daily averages were computed by calculating the trading volume of each stock daily as the closing price multiplied by shares traded that day. All such trading volume is summed up and divided by 252 as an approximate number of annual trading days.
Important Disclosure Information:
Past performance does not guarantee future results. Diversification does not eliminate the risk of market loss. MarketPlus Investing® models consist of institutional quality mutual funds.
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