On Friday, January 17 – after a spectacular 40% runup that started the day after Christmas 2018 – the Standard & Poor’s 500-Stock Index closed at 3,329.62.

Two weeks later to the day – last Friday, January 31 – the Index closed a little over three percent lower, at 3,225.52. (Indeed, more than half that damage was done on Friday.)

Financial media suspects that the blended value of 500 of the largest, best financed, most profitable businesses in America and the world has “lost” three percent – with more “losses” to come – due to the outbreak in China of a new strain of coronavirus.

As goal-focused long-term investors – we doubt this.

There is no way of knowing how far this outbreak will spread, nor how many lives it will claim, before it is brought under control. Many of the world’s leading virologists and epidemiologists are working on it and their efforts will ultimately succeed.

But if the rich history of similar outbreaks in this century is any guide, this would seem to be a reasonable hypothesis.

Remember:

  • 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 2016-17

Without belaboring the point: the super-spreader of SARS – a fish seller – checked into a hospital in Guangzhou on January 31, 2003, basically infecting the whole staff. The epidemic exploded from there.

On that first day of the litany of epidemics cited above, the S&P 500 closed at 855.70. Seventeen years and six epidemics later (including the current one), this past Friday the Index closed fairly close to four times higher.

Our team welcomes inquiries around this issue. In the mean time, the best investment advice we have to offer would be that you turn off the television set.

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