The U.S. market bounced back on Wednesday despite fears over the Wuhan coronavirus. While investors are understandably concerned about a global pandemic, the Wuhan virus is so far simply one of several recent outbreaks of coronaviruses that haven’t had any lasting impact on the global economy.
The most notable previous coronavirus outbreak happened back in 2003 with the Severe Acute Respiratory Syndrome (SARS) virus. During the peak of the SARS scare from December 2002 to April 2003, the S&P 500 dropped 8.3% and stocks related to discretionary spending and emerging markets (particularly China) underperformed. At the same time, the price of gold jumped 4.8%.
The good news is that over the next six months after the scare, the S&P 500 more than made up for its losses, gaining 18.6%.
More recently, the Middle East Respiratory Syndrome (MERS) coronavirus spooked investors starting in late 2012. From Nov. 1, 2012 to Dec. 1, 2012, the S&P 500 dropped 0.8% while the price of gold increased 0.5%. This time, the S&P 500 bounced back from the scare much more quickly, gaining 15.1% over the next six months.
Wuhan Versus SARS
So far, preliminary data on the Wuhan coronavirus suggests it isn’t as dangerous as SARS was.
“Our healthcare analyst Yang Huang believes that the impact of the 2019-nCoV outbreak could be less severe compared with the severe acute respiratory syndrome (SARS) outbreak in 2003, as the Wuhan virus appears to be less contagious and less fatal,” Bank of America analyst Helen Qiao said Wednesday.
Tom Essaye, founder of Sevens Report Research, said investors should be prepared for more Wuhan headlines to move markets in coming weeks.
“From a market standpoint, since this disease is closely related to SARS, I think the market reaction to the SARS outbreak gives us a good template to follow,” Essaye said.
Here’s a look at a handful of stocks and ETFs that can move on major Wuhan virus headlines:
- Alpha Pro Tech, Ltd. (NYSE: APT)
- Novavax, Inc. (NASDAQ: NVAX)
- NanoViricides Inc (NYSE: NNVC)
- Lakeland Industries, Inc. (NASDAQ: LAKE)
- BioCryst Pharmaceuticals, Inc. (NASDAQ: BCRX)
- Cleveland BioLabs, Inc. (NASDAQ: CBLI)
The biggest near-term economic risk for investors would be if Wuhan virus spooks international travelers into staying home, particularly when it comes to the upcoming Chinese New Year celebration. However, investors can expect the virus to have negligible long-term economic impact unless new evidence surfaces that the Wuhan virus is more contagious and/or more deadly than initially believed.
Do you agree or disagree with these predictions? Email email@example.com with your thoughts.
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