Category Archives: Top Plays

On Friday, January 17, 2020 the Standard & Poor’s 500 Stock Index closed at 3,329.62. This was the result of a spectacular 40% run-up that started the day after Christmas 2018.  Two weeks later to that day — last Friday, January 31st — the S&P Index closed a little over three percent (3%) lower, at 3,225.52, with more than half of the drop occurring on that Friday.

We were then invited by financial media to suspect that the blended value of the S&P 500 Index companies, some of the largest, best financed, most profitable businesses in American and the world, had “lost” three percent.  Not only that, were told that more “losses” were to come, due in large part to the outbreak in China of a new strain of coronavirus.

Permit us to doubt this, and to suggest that you — as goal-focused, long-term investors – join us in doubting it. 

We do not claim to have any idea how far this outbreak will spread, nor how many lives it will claim, before it is brought under control.  We are reasonably certain that many (or perhaps most) of the world’s leading virologists and epidemiologists are working on it, and we believe that their efforts will ultimately succeed.  Clearly, this is nothing more (or less) than our personal opinion.  

But, if the rich history of similar outbreaks in this century is any guide, this would seem to be a reasonable hypothesis.  We draw your attention to:

• SARS in 2003-04, also originating in China
• The “bird-flu” epidemic in 2005-06 [H5N1 avian flu]
• In 2009, a new strain of swine flu [H1N1 influenza virus]
• The Ebola outbreak in the autumn of 2014
• The mosquito-borne Zika virus outbreak in 2016-17

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), this past Friday (January 31, 2020) the S&P Index closed fairly close to four times (4x) higher.   As of this writing (2:00 pm Feb. 6, 2020), the S&P 500 is trading at 3,345.07, not only erasing the “coronavirus drop” but now setting an all time high. 

The moral to the story, you ask? Make every effort to avoid long-term investment decisions based upon the headline of the day.  The coronavirus situation is serious, and absolutely should be addressed post-haste by the world’s economic powers, but should also be put into the context we mentioned above.  This difficult situation will be resolved, and in time, another problem/crisis will take its place.  Discipline, focus, and attention on your goals and your plan will ultimately be the factors leading to your financial and retirement success. In the meantime, we think the most helpful, and certainly most heartfelt, investment advice we can offer would be to turn off the television set. 

Sincerely, 
Your team at Financial Coach

Resources

The World Health Organization provides an archive of disease outbreaks by year, https://www.who.int/csr/don/archive/year/en/, along with an extensive historical timeline for each.  Additional information can be found on the Center for Disease Control (CDC) website and Wikipedia.

S&P 500 Index historical prices were obtained, as reported by the Wall Street Journal website, at https://www.wsj.com/market-data/quotes/index/SPX/historical-prices

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