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Coronavirus and the Markets - Here's What You Need to Know


Following weeks of coronavirus headlines detailing the outbreak, markets have responded with increased volatility. Here's what you need to know:

Why are markets moving so much?

Outbreaks like this are hard to predict and the markets do not like uncertainty — particularly after a recent period of record market gains.

As the epidemic spreads beyond China, investors worry that it could slow trade and the global economy.

How long will the volatility last?

It’s tough to say and we can’t predict what markets will do, but this isn’t the first time we’ve dealt with an epidemic. Here are some examples from previous outbreaks:

Chart source: CNBC, Yahoo Finance

The past does not predict the future - but previous outbreaks led to panic selling followed by rallies after the initial outbreak.

However, it is important to keep in mind that epidemics don’t happen in a vacuum; there are always underlying economic conditions and market fundamentals that influence how investors react over the long-term.

Pullbacks and periods of volatility happen regularly, for many reasons.

Whether it is an epidemic, geopolitical crisis, natural disaster, or financial issue, markets react negatively to bad news before they recover. 

The best thing you can do is stick to your strategy and avoid emotional decision-making.

Chart Source:

S&P 500 performance during outbreak: https://www.cnbc.com/2020/02/24/avoid-this-investing-mistake-as-coronavirus-fears-grip-the-markets.html

S&P 500 performance six months after outbreak: Yahoo Finance. 6-month performance between open of first trading day of the month after end of outbreak to adjusted close of final trading day of the sixth month.

SARS: April 1, 2003 - Sept 30, 2003
MERS: Dec 3, 2012 - May 31, 2013
Ebola: March 3, 2014 - Aug 29, 2014
Zika: March 1, 2016 - Aug 31, 2016

Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. The Standard & Poor's 500 (S&P 500®) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are not available for direct investment. The performance of the index excludes any taxes, fees and expenses.

Schad TenBroeck is an Investment Advisor Representative of Sequoia Financial, LLC. Investment Advisory Services are offered through Sequoia Financial, LLC, a California Registered Investment Advisor. Insurance services are offered through TenBroeck Insurance Services. Sequoia Financial, LLC and TenBroeck Insurance Services are affiliated.


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