« Back to Blog

Posted March 4, 2020

COVID-19 and February’s Market

Forrest Bell, CFP

Forrest Bell, CFP®

After an initial rise and pullback in January due to Coronavirus fears, U.S. stocks followed a similar but more exaggerated path during February. First surging almost 5% to new all-time highs, U.S. stocks fell precipitously based on renewed Coronavirus concerns, ending the month down 8%. The U.S. stock market has now fallen 13% from its recent mid-February peak, putting it officially into correction territory. For context, the overall U.S. stock market is back to where it was in October of last year, and still up 3% compared to six months ago.

 

We understand our clients are thinking about the COVID-19 virus, and are likely concerned for their health and that of others. Even though we cultivate a long-term perspective on investments grounded in clients’ individual goals and concerns, we are aware that headlines can be troubling. When headlines are troubling, we are in favor of holding current events in perspective.

 

Corrections are a normal part of the market’s cycle. Since World War II, the U.S. stock market has experienced a correction of 10% or more roughly once per year. We also know that the stock market responds to epidemics. Of the 12 epidemics to occur in the last 39 years, the markets usually showed a decline one month following the first occurrence of the disease. But markets are resilient. Six months after the first occurrence of each disease, the U.S. market was positive 91% of the time.

 

While it is still too difficult to estimate the economic consequences of the COVID-19 outbreak in the U.S., countries with stable economies and developed health care systems are better positioned to manage the virus. Regarding the U.S. economy, the Federal Reserve Board’s Vice-Chair, Richard H. Clarida, commented on February 25th that, “the U.S. economy is in a good place” and, “it is still too soon to even speculate about either the size or the persistence of [the coronavirus] effects, or whether they will lead to a material change in the outlook.” That same day, addressing the possibility of a recession, former Federal Reserve Chair Janet Yellen also commented on the virus, stating, “we had a pretty solid outlook before [the coronavirus] happened – and there is some risk, but basically I think the U.S. outlook looks pretty good.”

 

In a recent CNBC interview, Warren Buffett was asked to comment on the virus and U.S. stocks. His response: “The real question is: ‘Has the 10-year or 20-year outlook for American businesses changed in the last 24 or 48 hours?’” Warren didn’t think so and nor do we. It’s a good reminder that, for investors, patience is a virtue.

Sign up for our monthly Bell e-News.

To get the latest news and updates from us, please fill out the form and click "Subscribe" to receive our e-newsletter.

Market Analysis

White paper feature image
Sector Imbalances & Investor Sentiment
October 2, 2020 Sector Imbalances & Investor Sentiment The beginning and the end of September rescued the stock …Read More

Video

video feature image
Webinar: 2020 Election Impact – What Investors Should Know
October 23, 2020 Presenters: Laurent Harrison, CFP®, Senior Investment Advisor and Financial Planner Ryan Kelley, …Read More

Publication

bellinvest publicaion
529 College Savings Plan Resources
November 1, 2019 529 Education Savings Plans are a meaningful topic for parents, grandparents, and anyone else who …Read More