Coronavirus worries officially enter the market as pessimism has shifted from the impact on China to the outbreak to other countries, like South Korea, Italy and Iran amongst others.

The market contracted over 3% today (so far). It is important to note that, although uncomfortable, big drops are normal.  S&P averages more than five 2% drops per year (median of 3)[1].  We even had five of them in 2019.

In terms of percentage, 3.4% (as of now), wouldn’t rank in the top 20. But in terms of points, over 900 points (as of now), would rank it in the top three[2].

The fear that the outbreak may hinder global growth is the main reason for the decline in stock prices. The damage to the Chinese economy and global supply chains disruptions have hurt Asian economies the most. However, it may also lower growth in developed markets if the virus continues to spread.

It is important to take the long-term view when investing.  If nothing has changed with the long-term view, then we don’t want to be reactionary with your investment strategy. Also, an important reminder that an unexpected event can occur at any time, and that portfolio diversification is critical.

Past outbreaks experienced market shocks.

But the Longer term effects don’t look nearly as dramatic.

If you have any questions or would like to discuss how the coronavirus outbreak might impact your portfolio, please contact your advisor.

[1] LPL Research

[2] Charlie Bilell, Twitter

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INDEX DEFINITIONS

The Dow Jones Industrial Average (DJIA) is an index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange (NYSE) and the NASDAQ.