Dear First Mates,
This. Too. Shall. Pass.
These four powerful words are a mantra of clients traveling aboard The WealthPlan LLC. I urge you to repeat (and keep repeating) these words to those you care about when faced with whatever “apocalypse du jour” is being publicized in the media. The recent crisis I’m speaking of is the outbreak of a new strain of coronavirus in China.
As I write this, the S&P 500 Total Return index is down around 3.2% for the year. Financial media has invited us to suspect that the blended value of 500 of the largest, best financed, most profitable businesses in America and the world has “lost” 3.2%—with more “losses” to come.
Permit me to doubt this and suggest that you—as goal-focused long-term investors—join me in doubting it. I do not claim to have any idea how far this outbreak will spread or how many lives it will claim before it is brought under control.
I’m reasonably certain that many (or perhaps most) of the world’s leading virologists and epidemiologists are working on it, and I believe that their efforts will ultimately succeed. This is my personal opinion.
But if the rich history of similar outbreaks in this century is any guide, this would seem to be a reasonable hypothesis. I draw your attention to the following:
- SARS in 2003-04, also originating in China
- The bird flu epidemic in 2005-2006
- In 2009, a new strain of swine flu
- The Ebola outbreak in the autumn of 2014
- The mosquito-borne Zika virus outbreak in 2016-17
Without belaboring the point, the super-spreader of SARS – a fish seller – checked into a hospital in Guangzhou on January 31, 2003, basically infecting the whole staff. The epidemic exploded from there.
On that first day of the litany of epidemics cited above, the S&P 500 closed at 855.70. Seventeen years and six epidemics later (including the current one), the Index closed fairly close to four times higher this past Friday. I’m confident that you see where I’m going with this.
As always, I welcome your inquiries about this issue. In the meantime, I think the most helpful – and certainly most heartfelt – investment advice I can offer is to turn off the television set. This seems to be a recurring theme in my recent newsletters.
Sources
The closing level of the S&P 500 on 1/31/2003 is from Standard & Poor’s, as reported by Yahoo Finance. Year-to-date data from the S&P 500 Total Return Index is provided by YCharts as of 2/26/2020.
Dave’s Picks
The Smashing Pumpkins – Tonight, Tonight (Official Music Video)
“GET YOU” by Daniel Caesar | Choreography by Alexander Chung
Crossed #1 (scary zombie-like series)