How might the Coronavirus outbreak affect the market? Mary Ann Drucker, our Assistant Portfolio Manager, takes a look at how equity markets performed during past epidemics.
February Stock Market Update Transcript
Hello! I’m Mary Ann Drucker, here with our video Market Update for February 2020.
After the equity market’s strong performance in 2019, it would not have been surprising to see stocks take a breather and move sideways in the new year.
This would have given investors a chance to “digest” the market’s gains and reset expectations for 2020. But actually, January picked up the baton from December, and stocks forged ahead – that is, until we got to the end of the month.
For most of January, the equity markets seemed to shrug off concerns over Trump’s impeachment trial or a virus originating in China. But in the end, fears stoked by the Coronavirus won out, pushing both the Dow and the S&P 500 into slightly negative territory for January 2020.
The Coronavirus is what some might consider to be a “Black Swan” event which is an unpredictable event that seems to come out of nowhere with potentially severe consequences.
But epidemics are not new. Since 2000, the world has seen several outbreaks of contagious diseases: SARS, the Swine flu, Ebola, Zika, to name a few.
So we thought it might be a good idea to look back at how the equity markets have performed during past epidemics.
A chart provided by Calamos Wealth Management shows how the S&P 500 performed during past epidemics, ranging in a timeframe from one month out to twelve months following the month-end of the initial outbreak.
We used the S&P 500 here because the equity exposure in the portfolios is predominantly domestic U.S.
With the early epidemics from the 1950s into the 1980s, the S&P 500 was negative twelve months after the initial outbreak. But in recent history, with outbreaks from the 1990s onward, the S&P 500 actually recovered after a short-term immediate, negative impact, and there were other factors, such as whether the economy was in a recession at the time, that seemed to have a longer-term effect on the markets rather than the epidemics themselves.
Well, that’s it for this market update. If you have any questions or comments about this content, please don’t hesitate to call or e-mail us.
Until next time, thank you for watching.
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