Coronavirus Disease 2019, or COVID-19, is a new viral infection that emerged in late 2019. The virus, which originated in Wuhan City, Hubei Province, China, has now spread to 32 countries, including the United States. With almost 79,000 cases and 2,462 deaths*, COVID-19 has caused concern and fear throughout the world. And, this has not gone unnoticed by the stock market. So, I wanted to take a look at how the markets are reacting to this new outbreak, and what we might expect in the future.

Dominating the news since the beginning of the year, COVID-19 has been blamed for much of the recent volatility in the stock market. As reported cases increase, and countries begin taking significant precautions, companies are starting to assess possible disruptions to their business. Whether it is supply chain problems, or less traffic in stores and restaurants, anticipated slowdowns are the common conclusion. And this is causing fear in the markets. In just the last three days (as of 2.24.2020), the ten year US Treasury yield has dropped from 1.57% to 1.37%. This is down from 1.91% at the beginning of the year. Treasury yields dropping is a sign of a rush to safety. And, while the S&P 500 is essentially flat year to date, it is down 4.73% over the last three days.

But, let’s take a look at how this has panned out in the past. With the SARS outbreak in 2003, there were 8,098 cases and 774 fatalities**. This is a mortality rate of 9.6%. Six months after the onset of the outbreak, the S&P 500 was up 14.59%^. After 12 months, it was up 20.76%^. MERS had a similar outcome. With 2,494 cases and 858 fatalities^^, MERS had a mortality rate of 34.4%. Even so, the S&P 500 had a return of 10.74% and 17.96% for the six month and 12 month periods^, respectively, following the initial outbreak. Both SARS and MERS are coronaviruses.

Similar to the flu, COVID-19 can cause fever, a cough, and shortness of breath in the people it infects. However, COVID-19 has a higher death rate so far, with about 3.18%* of the cases being fatal. But, this isn’t what spooks the market the most. The scariest part of COVID-19 is the unknown. More than anything else, the market hates uncertainty. With the flu, we know what to expect. Flu season starts in about October, and by April or May, it’s pretty much over. We know that about 8% of the US population will contract the flu*** and, unfortunately, several thousand will die. The fact that we still don’t understand the complete clinical picture of COVID-19 creates immense uncertainty. So, even though the flu numbers just in America dwarf the current COVID-19 numbers, we don’t know how or when the outbreak might end.

With other viral outbreaks, the markets have gone through similar undulations. And, every time, without exception, the markets have recovered. This is evidenced by the fact that we continually achieve all-time highs, even as recently as February 19th of this year. It’s important to remember that investing for the long term gives you the best chance for success. And, although past performance is not an indicator of future returns, if history is any guide, we will survive this latest outbreak and successfully move on to the next crisis.

*https://www.who.int/docs/default-source/coronaviruse/situation-reports/20200223-sitrep-34-covid-19.pdf?sfvrsn=44ff8fd3_2

 

^https://www.marketwatch.com/story/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22

 

**https://www.cdc.gov/sars/about/fs-sars.html

 

^^https://www.who.int/emergencies/mers-cov/en/

 

***https://www.cdc.gov/flu/about/keyfacts.htm

 

Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CUSO Financial”) (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor.  Products offered through CUSO Financial: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial.  Verity Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members.  Atria Wealth Solutions, Inc. (“Atria”) is not a broker-dealer of Registered Investment Advisor and does not provide advice.  CUSO Financial is a subsidiary of Atria.

Gavin Chinn, CUSO Financial Services Advisor at Verity

Check the background of this investment professional on FINRA’s BrokerCheck.

A Financial Advisor registered through CUSO Financial Services, L.P., Gavin has 25 years of experience as an advisor in the Puget Sound area.

“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship, I can really get a sense of what’s going to work best for them.”

Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.

So what is Gavin’s vision for his dream retirement?

“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”

When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football and taking weekend trips around the Northwest.

Gavin is registered to transact securities business in the states of AZ, CA, CO, FL, HI, ID, IL, KS, MN, NV, NY, OR, UT, VA and WA.

*Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CUSO Financial”) (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. Verity Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is not a broker-dealer or Registered Investment Advisor and does not provide advice. CUSO Financial is a subsidiary of Atria.

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