Monday was a tough day in the stock market, with the S&P 500 Index down more than 3% as the number of coronavirus cases reported outside of China jumped. Monday’s losses reversed all of this year’s gains so far for the S&P 500 Index and the Dow Jones Industrial Averages. The Nasdaq Composite Index appeared to be holding onto a small year-to-date gain through Monday’s close. After several months of relative calm in the markets, Monday’s volatility probably felt worse than it might have otherwise, but a 3% one-day decline never feels good.
Every virus outbreak is different, but looking back at other major global outbreaks over the last three decades (SARS, bird flu, swine flu, Zika, etc.), we see that the impact to the U.S. and global economies and stock market has tended to be short-lived. We think the current outbreak has the potential to follow a similar path, although we recognize there is still significant uncertainty. The coronavirus has spread more quickly than SARS, the most comparable outbreak, but the policy response also has been more aggressive, and the survival rate has been higher.