As I write, there are over 85,000 confirmed coronavirus (covid-19) cases with just under 3,000 reported deaths. Those numbers are likely to rise in the coming months. You can look just about anywhere and see reports – sometimes scary, get your heart racing, downright hysterical type reports - revolving around the coronavirus. But is this virus truly that bad? Taken at face value, anything labeled a “pandemic” virus sounds scary. It is easy for the media to manipulate the reality and play on our fears that we are facing a virus that will wipe out mankind.
Let’s take a deep breath and put things into perspective.
Since the beginning of recorded history, viruses have tried (and failed) to wipe out humanity. In the 14th Century, it is estimated that the “Black Death” wiped out about half of the world’s population, yet humankind survived. To compare that to a more recent event, the biggest pandemic to hit the world in the past 100 year was in 2009… and it was the flu. It was reported that around 203,000 people died that year as a result of the flu. Not only did we survive, but that year the S&P 500 went up over 23%.
Now how is it that the flu, which unfortunately kills somewhere around 30,000 people annually, doesn’t negatively affect the market like these new novel viruses? Personally, I think we’ve become numb to it. The flu is old news, despite being one of the deadliest sicknesses in history. We don’t have a cure for it, vaccine effectiveness rates are generally lower than 50%1 and it circulates through the population every year. Historically, virus outbreaks have been far worse on our emotional and psychological health than it has been on our economy.
Instead of continuing to get caught up in the fearful narrative that surrounds this new coronavirus and has thus pummeled our markets, let’s look at the positive side of things. To do this, we need to focus our attention on company financials, hard data and key economic indicators - all of which are positive right now.
Our portfolio design at Insight Folios is based on stocks which produce dividend income, and so far that dividend income has been untouched by this market downturn. That means even though your account value has dropped considerably, your dividend income has gone up at the same time. Although I never like seeing red in our portfolio, I am happy to say that your retirement income has been unaffected by this coronavirus fear mongering.
I do believe our economy will be affected by this global scare, but not nearly as dramatically as it has been up to this point. Let me say that a different way - I believe that our economy is set to have another good year and I am hoping to see positive returns in the market by year’s end. Most indicators are positive.
Ok, so let’s bring this message home.
All of the news surrounding this pandemic is scary. I would be lying if I said that early on, I was not scared too. However, after learning more about the virus, it is not nearly as deadly as initially thought. I do believe the market will recover, but it will take longer to recover than the average flu patient. Rest assured that the companies we have in our portfolio are very well positioned to handle this slowed market condition.
We are not hitting the panic button here at Insight Folios. Rather, we are looking at this market downturn as an opportunity to take advantage of great price discounts on dividend shares!
Here’s to your health, and the health of the economy.