The Impact of the Coronavirus on the Stock Market and Your Financial Portfolio

As the coronavirus continues its trek around the world, speculation about the virus’s impact on the global stock market has been equally rampant.

Those asking whether they should get more conservative with their financial investments or pull out of the market altogether are not wrong to assume that the coronavirus will impact the stock market. The question is, what should we do about it?

We have seen articles crop up lately, including all manner of advice and speculation about which stocks (medical, for example) you should add to your financial portfolio NOW and which others would be best to get rid of quickly.

But history tells us the wiser move, for now, is to wait. 

The coronavirus isn’t the first virus to impact the stock market

Firstly, it’s important to keep in mind that a virus impacting the stock market is nothing we haven’t seen before. Fear over spreading illnesses hitting the stock market is relatively commonplace (think Ebola, avian flu, SARs, the list goes on). Does coronavirus seem different than all those we’ve seen before? Sure. But so did each of them when they first began to spread.

When you include the full list of catastrophes of all forms that hit the news on a regular basis, coronavirus seems like a mere drop in the bucket. In every single case, when faced with these catastrophes, the market has recovered, and fairly quickly at that, based largely upon the duration of the event in question.

Financial winners don’t panic

Historically speaking, the financial “winners” in these situations are the ones who let everyone else panic and make bad decisions and then systematically and methodically bought right into the mess as stock values were plummeting. I like to call upon a much-loved quote from J.P. Morgan, “In bear markets, stocks return to their rightful owners.”

The market has already accounted for coronavirus

We understand that markets are pricing in information rapidly. So, if everyone knows the coronavirus will make it to our shores, then this is already priced into the stock market. Interestingly, if you look at what has happened since the coronavirus was first discovered, you see financial markets were rising, bottomed a day after coronavirus was proclaimed a global emergency, and then markets processed and began to level off again.

If you are a client of Financial Plan or work with another trusted financial advisor, the plan you currently have in place should also already account for market ups, downs, and everything in between.  We build plans designed to weather events like the coronavirus in advance. This plan is customized to each client, which is why someone with a higher withdrawal rate might have less in the stock market. Now is the time to stick to your plan.

Cash as Charmin

For argument’s sake, let’s say that THIS particular virus is the one that’s going all the way. We’re all going down, coronavirus apocalypse and all that. Well, my friends, in that case, there is nothing more we could have done to protect ourselves financially. You pulled all your money out of the market and now it’s sitting in cash under your mattress? Great! You’ve got TP for a few months.

Instead of making guesses about the coronavirus’ impact on the financial market, plan for stability

Coronavirus or not, trying to guess where the stock market is going to go is a futile endeavor fraught with a multitude of issues.  It’s not just guessing when to get out, but also guessing when to get back in. Departure and arrival gates are not clearly marked, and when they are, they are usually written in a foreign language. Making rash decisions out of fear almost never produces the desired outcome. Instead, remember that maintaining sanity and stability in the financial markets is in everyone’s best interest and the surest way to make it back to better, coronavirus-free financial times.