Coronavirus Cogitation — February 5th, 2020

Posted By T. Lee Sherbakoff, CPA/PFS, CFP® on Feb 5, 2020


Coronavirus Contagion

from Lee Sherbakoff, The Nalls Sherbakoff Group, LLC.

Dear friends,

On Friday, January 17 – after a spectacular 40% run-up 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 down a little over three percent, at 3,225.52. And, more than half that damage was done on Friday.

We have therefore been invited by financial media to suspect 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.

We do not claim to have any idea how far this outbreak will spread, nor how many lives it will claim, before it is brought under control. However, we are reasonably certain that many (or perhaps most) of the world’s leading virologists and epidemiologists are working on it, and I believe their efforts will ultimately succeed. Clearly, this is nothing more (or less) than our personal opinion.

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

– 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. I’m confident that you see where I’m going with this.

As always, I welcome your inquiries around this issue. In the meantime, I think the most helpful – and certainly most heartfelt – investment advice I can offer would be that you turn off the television set.

Most sincerely,

The Nalls Sherbakoff Group, LLC

DISCLOSURES: The information provided in this letter is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment, legal, or tax advice. The Nalls Sherbakoff Group, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of, or reliance on the information. These indexes reflect investments for a limited period of time and do not reflect performance in different economic or market cycles and are not intended to reflect the actual outcomes of any client of The Nalls Sherbakoff Group, LLC. Past performance does not guarantee future results.