Gephardt: How Investors Reacted To Past Global Disease Outbreaks
SALT LAKE CITY, Utah – The Dow Jones Industrial Average dropped another 357 points Friday. That puts it off nearly 3000 points for the week. Your retirement savings have likely taken a beating.
As you have no doubt heard, uncertainty surrounding the coronavirus is being blamed for the drop. Will people go to restaurants, buy concert tickets, and travel – or will they stay home?
Will small businesses that rely on imported goods be able to continue to manufacture, or will industry slow to a crawl?
No one knows the answers to those questions for sure, but what we do know is the way US and global stock markets have reacted to past outbreaks.
KSL crunched the numbers for some of the major outbreaks in recent memory and found that, with many, the markets didn’t slip much at all.
During the Avian Flu in 1997, the Dow saw steady growth.
In 2009, H1N1 contributed to a 2 percent drop in the first week but, a week later, the market was up again.
Two weeks after Ebola, the market was off 0.21 percent, but recovered the following week.
In 2002, the SARS outbreak was more striking. The Dow was down almost 10 percent three months after the disease first struck. Three months later, the Dow was back into the black.
KSL took our research to Allen Hughes, senior financial planner with Deseret Mutual Benefits Association. He said the impact of coronavirus is “much bigger” than the other outbreaks. As of Friday’s close, the Dow was down more than 10 percent for the week.
Still, he was preaching patience.
“Once the decline has happened, generally the most prudent thing to do is to be patient,” he said. “The patient investor is usually the one who comes out on top.”
Investors who fear the market may tumble further can opt to sell and deal with the current market losses.
At this point, with the markets down as much as they are, we are seeing the same numbers that we saw last August. It’s a big step back, to be sure, but an important perspective to keep in mind, Hughes said.
“All we’ve really done is given back 6 months’ worth of profits,” Hughes said. “It’s not like we’ve gone back to, you know, 5 or 10 year ago levels.”
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