Stock Market Reaction to Past Epidemics – February 5, 2020
Friday’s selloff tied to the coronavirus in China lopped 603 points (2.1%) off the Dow Jones Industrial Average1.
- It was the biggest one-day percentage decline since Aug 23 (St. Louis Fed data).
Stocks are not immune to volatility, as we’re well aware. When shares have experienced a big runup in price, they may be more vulnerable to unexpected events.
- Today’s concern: the virus could slow economic growth in China, which ripples around the world.
But past epidemics have had little medium and long-term stock market impact.
Reviewing the data since the early 1980s (13 epidemics that include SARS, Avian flu, Swine flu (H1N1), Ebola, and Zika):
The average return one-month, 3-months and 6-months later for the MSCI World Index* was 0.44%, 3.08%, and 8.50%, respectively (Charles Schwab).
*The MSCI World Index is an unmanaged index of 1,644 stocks across 23 developed market countries. It cannot be invested into directly. Past performance is no guarantee of future performance.
Is it different this time? No one has a crystal ball but history suggests concerns will subside, even as the number of cases is likely to rise over the near term.
Created 2020-02-05 15:43:46
