Markets across the globe have sold off rapidly this week as a result of uncertain impacts of the coronavirus (COVID-19). At the time of this writing, the S&P 500 is down over 10% from its high which is an official indication of a market correction. The S&P 500 was up 30.5% in 2019 and an additional 5% through February 19th of this year. The market reaction is a result of a multitude of companies including Apple and Microsoft that announced they would miss their fiscal year 2020 revenue and earnings figures as a result of supply chain disruptions and lower demand. Many other companies have stated that they simply do not know what the impact will be to their financials due to the rapidly changing circumstances and uncertainty around the virus. Markets typically react negatively to high levels of uncertainty and this situation is no different.
For some comparison, during the peak of the SARS outbreak in 2003, the S&P 500 fell 14.1% and subsequently rallied 26.2%. Similarly, during the peak of the Ebola outbreak in 2014, the S&P 500 fell 5.4% and subsequently rallied 11.4%. These past instances are representative of market overreactions to transitory events that do not directly affect the underlying fundamentals of companies. In addition, history shows us that the economic impacts of these pandemics tend to be much smaller than the markets indicate in the short term.
We at Old Second Wealth Management remain focused on long term investing, and market volatility predicated on exogenous events often create opportunities to invest. If you have any questions or concerns, please do not hesitate to reach out to you Old Second Relationship Manager or Investment Officer.
Rich Gartelmann, CFP® – (630) 844-5730 – firstname.lastname@example.org
Steve Meves, CFA® – (630) 801-2217 – email@example.com
Brad Johnson, CFA®, CFP® – (630) 906-5545 firstname.lastname@example.org
Mike Cava, CFA®, CFP® – (630) 281-4522 email@example.com
Mike Demski – (630) 966-2430 firstname.lastname@example.org
Jacqueline Runnberg, CFP® – (630) 966-2462 email@example.com
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