Will the coronavirus infect your investment portfolio?

The bull market has paused for the past few days as fears of the coronavirus spread. The first case of the virus in the US has the media in a frenzy and now people are hyperfocused on the possible effects of the economy and investments. Should you be worried?

Ground zero

The coronavirus was first identified in late 2019 in Wuhan City, China and has caused over 600 people to get sick and reportedly has claimed 17 lives. For those not familiar with Wuhan, it is the sprawling capital of the Hubei province. Wuhan has a population of over 11 million people.

This is coming on the eve of Lunar New Year where millions of Chinese travel and spending is high. Thus far only 3 cities have been placed under travel restriction representing roughly 20 million people. This isn't a significant amount of people but could cause issues if the illness spreads.

Investment impact

The good news is that given modern science, this outbreak will likely be short lived and this means that you shouldn't be worried about the investment impact. If it turns into a pandemic, it would be a different story but let's hope for the best.

Charles Schwab looked at past epidemics and the MSCI All World Index and the market proved resilient in epidemics. The index gained 0.44% 1-month after an epidemic, 3.1% in the ensuing six-months and 8.5% a year later.

stock market epidemics

According to Dow Jones Market Data, the S&P 500 performed even better in past epidemics. The S&P 500 rose 14.6% 6 months after the first occurrence of SARS back in 2002-03.

snp epidemic

In conclusion, we don't believe there is reason to be concerned about the coronavirus' impact on your investment portfolio. The stock market needed a breather after a strong fourth quarter run so we would take a correction to opportunistically add to stock positions.

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About the Author: Chris Wang

Chris Wang


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