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Coronavirus effecting Interest Rates

Some Perspective on the Markets from the local expert:
Jeffrey R. Saunders, JD, CFP®

Recent market drops make it easy to remember Paul McCartney’s lyrics, “yesterday, all my troubles seemed so far away…” It was just February 19th that the markets were at an all-time high. Just over a week, later the major averages had dropped nearly 15%.

What was starting out as a good first quarter has changed course rather quickly. It’s fair to ask where do we go from here?  It is my opinion that the world’s leading virologists and epidemiologists are working non-stop and that their efforts will ultimately succeed. I base this opinion on the known history of the following six epidemics:

  • SARS in 2003-04, also originating in China.
  • The bird flu epidemic in 2005–2006.
  • In 2009, a new strain of swine flu.
  • The Ebola outbreak in the autumn of 2014.
  • The mosquito borne Zika virus outbreak in 2016-2017.

The six epidemics cited above all occurred over the last 17 years. Prior to the first epidemic listed above in 2003 the S&P 500 closed at 855.70. As of last Friday, that same index was almost 4 times higher. I think you see where I am going with this.

Jeffrey DeMaso, who is director of research for a well-respected Vanguard newsletter, found that over the last 33 years the S&P 500 had a daily drop of 3.5% or more on 55 separate occasions (last Thursday’s plunge was 4.4%). He then found that following 45 of those 55 market drops, the Vanguard S&P 500 Index Fund was up an average of 20% one year later.  That is an important fact to remember with all the pure speculation of how the Coronavirus could affect the world economy.

The recent world health events raise concern for all of us and our thoughts are with those who are suffering from the Coronavirus. For investors, it is important not to let the headlines and media comments influence your long-term investment decisions.

Information provided by:

Jeffrey R. Saunders, JD, CFP®
Counseling in Legal and Financial Matters
39111 Six Mile Rd. Ste. 102
Livonia, MI 48152
P: 248-644-6610 F:734-468-0226