Coronavirus Update: March 4, 2020 | Trust Point
Click Here to Select Your Login

Coronavirus Update: March 4, 2020

By
Updated March 4, 2020

Trust Point

We are proud of Trust Point’s century of service reputation of excellence. But, our approach and purpose has always been focused on the future. Not just our own company’s future - but, more importantly, our client’s futures.

Coronavirus, or COVID-19, has so far been responsible for over 3,200 deaths and more than 94,000 infected people worldwide, the majority still in mainland China (see chart). Although more than half of those infected have successfully recovered and the daily growth rate of new confirmed cases in mainland China has slowed (good news), it continues to increase worldwide (bad news). As a result, investors started to fear the worst and started to question consensus forecasts for economic growth and earnings expectations going forward. This caused the swift market sell off we experienced in late February.

ChartCovid 19Numbers

While this is a human tragedy, we still don’t expect the coronavirus, or COVID-19, to be an economic tragedy. If history repeats itself, and it usually does, viral outbreaks don’t have a lasting impact on markets (see chart). In fact, over the past 40 years, the S&P 500 six-month % change was positive in 11 of the 12 instances, with an 8.8% average gain following the start of an ‘epidemic’.

Chart update

We do however expect economic growth and earnings to be impacted in the short term. At this point, it’s estimated that global GDP growth in the first quarter of 2020 could fall in the 0% to 1.5% range vs about 3%+ in normal times. Economic growth should quickly bounce back starting in Q2 under the base case scenario as pent-up demand and inventory rebuilding boost economic activity. However, if new infections continue to grow significantly at the international level, the drag on global growth could be greater and last longer.

In the meantime, we expect a higher level of volatility in the marketplace. Volatility itself is not dangerous if handled appropriately. Our best advice stands: Unless your unique personal situation has changed, tune out the noise and stick with your long-term plan and remember that in times of stress, the best action is often no action at all.

Investors should take comfort in the fact that equities are still up nicely over the past 12 months. While they have sold off in recent days, other portions of the portfolios (high quality bonds in particular) are performing well, illustrating the benefits of diversification.

As always, we are monitoring the situation closely and stand ready to make adjustments to portfolios if deemed appropriate.

Remember, what matters most over the long-term is not market timing, but time invested in the markets.

 

Feel free to reach out to us at [email protected] for additional information.

Please visit the Centers for Disease Control and Prevention or the World Health Organization websites for the most updated information on the coronavirus.

Share This Post

Trust Point

We are proud of Trust Point’s century of service reputation of excellence. But, our approach and purpose has always been focused on the future. Not just our own company’s future - but, more importantly, our client’s futures.