It’s reasonable to worry about the outbreak of a previously unknown virus, and taking safety precautions is prudent. Yet, fear of the unknown should not drive our decision-making or cause us to shut down our lives. We may not be able to control travel bans, event cancellations and school closures. We can control our emotions and how we respond to challenges. The past is not predictive of the future, but it does offer valuable perspective. Consider the following information about previous pandemics and economic cycles.
- When most travel was by boat, infectious diseases typically spread around the world in six to nine months. Everything seems to happen faster today. With global air travel, a virus can become a pandemic within three months. That has been the case with Coronavirus, which first emerged in China in November 2019. The typical duration of a pandemic is 12 to 18 months; it can come in waves of about three to 12 months apart, according to the CDC.
- Schwab recently conducted an analysis of 13 global pandemics in the past 50 years. The data shows that once the number of newly identified cases starts to decline, economic activity and the stock market tend to quickly rebound.
- Data compiled by Capital Group shows that past market corrections and bear markets haven’t lasted forever. The Standard & Poor’s 500 Composite Index has typically dipped at least 10 percent about once a year, and 20 percent or more about every six years, according to data from 1950 to 2019. Each circumstance has been followed by a recovery and a new market high.
Recessions are part of the natural economy. Similar to the ebb and flow of the tide, expansions and contractions in the financial system are expected. At Perspective, we factor that into the long-term investment plans of our clients. While stocks rise and fall in the short term, they tend to reward investors over longer periods of time. Keeping your view on the long-term horizon will help you maintain a positive outlook.
Keeping all this in mind, we do recognize that each person’s situation is unique. There is not one right or wrong course of action. If you’re feeling anxious about your financial situation or simply want to know your options, please talk with your Perspective advisor. Being informed and talking about your concerns can go a long way in relieving stress. We are always available to help.
As we all ride out this latest challenge, focus your time and energy on things you can control. Do your best to continue the activities you enjoy. Spend time outdoors, visit with a friend, whatever makes you feel happy.