We have our first surprise of the year: The Coronavirus. Just last month I wrote in my annual forecast that we will be surprised by something this year. This is likely the first of several unexpected, unpredicted events we will experience in 2020.
It’s a good time to take a step back and identify what we know, what we don’t know, what we can control and what we can’t control. Those types of thinking exercises can help us make good decisions.
The Coronavirus is still in its infancy. We don’t know how much it will spread nor the economic toll it can take. It could be over in a few days with little economic impact or it could go on for some time and affect global economies. We have had similar health scares in the past 20 years: SARS, Avian Flu, Swine Flu and Ebola. All of those elicited similar panics in the media and temporary economic impact. As far as the stock market goes, just look what the market has done in the past 20 years despite not one, but several global health care scares.
S&P 500 Index. 01/01/00 – 12/31/19. Source: Yahoo! Finance
If the flu worsens, corporate earnings could be impacted, and the stock market may sell off. But, if it is anything like the past, it would be temporary. Therefore, if the market sells off, we should be looking at good entry points to buy high quality stocks on sale. Economic and stock market crises may be scary in the moment, but they provide lower prices for investors that actually want to “buy low”.
Turn on any media today and the headlines are dominated by Coronavirus. What if it wasn’t happening? What would they be talking about? And what happens when Coronavirus runs its course? What will the media talk about then? I don’t know – except, I know they will find something and make it seem like a very big deal.
We can’t control the news. We can’t control how other investors behave. But we are in complete control of what we choose to pay attention to and how we choose to respond. Choose wisely.
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