Global markets have recently been rocked by fears of the Coronavirus outbreak. Many economists and health organizations are relating the virus to the SARS outbreak from 2003, another highly contagious respiratory infection. Just for comparison, the chart below shows the beginning of 2003 for the MSCI All Cap World Index and displays the way the infection affected markets at the beginning of the outbreak versus what happened after investors had enough of the selling. Per the MSCI ALL Cap World Index, markets fell more than 12% at the beginning of the epidemic, and later returned 64% through the end of the year.
MSCI ACWI 01/01/2003 – 12/31/2003 provided by Bloomberg
We are not able to put an exact number on how we expect markets to react in the coming months to the newly spreading virus. Nor are we able to say for how long similar fears will affect the global economy. What we do know is history tells us these are both very difficult results to predict. We also believe there are reasons for investors to remain optimistic. For one, China has reacted to the outbreak more quickly than it has in the past. Also, advancements in medicine should relieve a little of the stress brought about by the virus. Risk velocity is also much higher today than it ever has been, which can cause greater market reaction to events such as the Coronavirus outbreak. This is especially true when assets are priced as high as they are currently. We believe a disciplined approach to long-term investing remains and will always remain the proven way to achieve positive investment performance.
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Grant Allen, Portfolio Analyst
About the Author: Grant Allen is a Portfolio Analyst for Acumen Wealth Advisors in Chattanooga, TN. Grant holds a Bachelor of Science in Finance-Investments from the University of Tennessee at Chattanooga’s Gary Rollin’s College of Business and has successfully passed Level One for the Chartered Financial Analyst® (CFA®) designation. The CFA® consists of three levels of exams, each requiring a recommended 300+ hours of study, minimum of four years of work experience, and multiple letters of recommendation. Exams cover Quantitative Methods, Economics, Financial Reporting and Analysis, Portfolio Management, Wealth Planning, and Ethics.
Information used in this commentary was obtained via Bloomberg L.P.
MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
The opinions expressed in this commentary should not be considered as fact. Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results. Any charts, graphs, and descriptions of investment and market history and performance contained herein are not a representation that such history or performance will continue in the future or that any investment scenario or performance will even be similar to such chart, graph, or description. All indexes are unmanaged, and an individual cannot invest directly in an index. Index returns do not include fees or expenses.
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