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Coronavirus Infecting the Stock Market

Last night was Chinese take-out night at the Terry home.  My daughter’s fortune cookie (shouldn’t they rename these to “words of wisdom cookies”?) was pretty apt given all of the news surrounding the coronavirus (CoVid-19) outbreak: The only certainty in life is uncertainty.

It feels like that’s never been truer.  The coronavirus is a globally spreading disease that we’re not sure how it started, how long the incubation or contagion period lasts, or when a vaccine for coronavirus will be developed.  At the same time, it seems as though we haven’t dealt with a disease that is both very easily spreadable and moderately deadly.  And the world has never been more interconnected, both in terms of the globalization of businesses, as well as the amount of international travel that occurs each day.  About all we have at this point is uncertainty.

And uncertainty is the one thing that the markets (i.e. investors, you and me included) hate more than anything.  Over the past three trading sessions, we’ve already seen a 7.3% drop in the S&P 500, while the VIX index (an index measuring volatility) is up 81.9%!

Where will it go from here?

In surveying some thoughts from some of the brightest investment professionals in the world, it’s obvious that they don’t have much more clarity.

  • Vanguard published a short piece encouraging investors to stay the course, while reminding folks that while they have a great team of economists, they’re not epidemiologists.
  • The folks at Seeking Alpha take a different stance and point out that we have higher than normal prices and earnings estimates on stocks, and that the coronavirus could be the catalyst that starts a major swoon.

In fact, reading a dozen different commentaries will give you almost as many differing opinions on just how all of this will play out.  In reality, how this ultimately affects investments will depend on the direction the coronavirus itself takes and what sort of economic impact ensues.  The fear part of coronavirus will likely play out on a short-term basis, as it often does in the stock market.  This is what happened most recently with the trade wars between the US and China.  The markets reacted pretty violently to tweets and rumors and in the end it was mostly a non-event for investors.

If the spread of coronavirus continues to escalate, I think we can all see the negative impact that would cause on global markets and almost every industry.  Airline and cruise line stocks are suffering some of the worst so far, but all risky (i.e. stock) investments aside from a few have been sold off in anticipation of an economic downturn.  We’ve seen estimates as high as $1 trillion in terms of the economic impact this virus could have if quarantines remain in place for extended periods and fear turns to long-term pessimism and a possible recession.

God is not unaware, and He is still in control.

We know this truth but forget it so easily.  He is the only one that knows the future, the one that knows how the coronavirus began and how it will end.  The Bible reminds us that God has not only been in control of, but also the author of, much bigger disasters like floods, plagues and famines.  He uses these for His purposes which we know are good even when we can’t make any sense of the good in them at times.

One purpose God seems to always have in these difficult times is to draw peoples’ hearts to Himself.

When I shut up the heavens so that there is no rain, or command locusts to devour the land or send a plague among my people, if my people, who are called by my name, will humble themselves and pray and seek my face and turn from their wicked ways, then I will hear from heaven, and I will forgive their sin and will heal their land. 2 Chronicles 7:13-14

My encouragement is for all of us to do just that and pray-

  • For those affected directly
  • For a vaccine to be developed quickly
  • For wisdom in containing the spread in the meantime
  • For wisdom for Shepherd Wealth Partners to guide our clients through this crisis
  • For your own heart not to give in to fear
  • That God would use this terrible disease to draw peoples’ hearts to Himself

I wish that we had cookies that could tell us the future instead of just giving us words of wisdom.  No one likes uncertainty.  Sometimes, however, God gives us the Graciousness of Uncertainly. Know that we are watching these developments carefully, and we’re taking this cautiously and seriously.  If you would like to talk through this in more detail, discuss your specific situation and portfolio or anything else, please feel free to call or email anytime!