The first thing on everyone’s mind is the coronavirus. The outbreak has drowned out Brexit, the Trump Impeachment trial, Amazon joining the trillion-dollar club again and just about everything else in the markets.
As I write Friday morning, the number of confirmed cases has exceeded 10,000 and the number of deaths has topped 213. The Dow is currently down 450 points.
Thursday, the World Health Organization declared the outbreak a global health emergency, which actually seemed to calm markets because it did not recommend restrictions on international travel.
As of Friday morning, the UK and Russia confirmed their first cases.
Our best wishes go out to those who are sick or have experienced loss due to the outbreak.
But let’s remember to keep things in perspective. After all, the flu, the one you probably get a shot for every year, causes plenty of fatalities.
I don’t want to minimize the crisis, but the Centers for Disease Control and Prevention estimates 8,000 people have died during flu season this year in the US.
And the total deaths from the flu from all of last year? 34,000. That’s in the US alone.
Some perspective helps. As investors, how should we view this coronavirus crisis?
First, let’s get some historical perspective from John Jagerson and Wade Hanson at Strategic Trader. They are InvestorPlace’s resident “quant” experts, who analyze market history for future performance.
First, they warn that data around disease outbreaks is always messy, but some patterns do emerge.
For example, the Ebola outbreak of 2014 affected transportation stock prices like Delta Airlines (DAL) and United Airlines (UAL). As you can see in the following chart, UAL dropped as much as 12% only to rally 89% by January 2015.
And there are still Ebola deaths in the world. There were 198 deaths from an outbreak in Congo in 2018 alone.
This sequence of an outbreak, followed by breathless headlines, completed with a market-whipsaw is common. However, it all relies on the behavior of the press more than any intrinsic feature of the outbreak itself.
***Matt McCall added more perspective and said if you’re nervous it’s ok not to buy on a dip – just don’t panic sell.
Matt’s Early Stage Investor service is a long-term investing service. He’s focused on getting in on the ground floor of the biggest trends in investing, buying companies that are in their early growth phase and holding to get the biggest percentage gains.
Investing like this requires holding during temporary market downturns, but Matt went so far as to show why panic selling now would be a huge mistake for any investor.
Let’s go back 15 years to September 30, 2014. The CDC had just confirmed the first case of Ebola in the United States. The next day, the Dow Jones Industrial Average fell more than 250 points – or about 1.5%. Two weeks later it was down nearly 1,200 points, or 6.8%.
But by the end of that month, the Dow was back at highs… and it went on to rally as much as 16% off that mid-October low before stocks sold off in the summer of 2015.
In other words, it took investors less than a month to shake off the fears of a U.S. Ebola epidemic.
History tends to repeat itself, and I have a strong feeling we’ll see a similar quick rebound to the coronavirus that we saw to Ebola back in 2014.
Holding during market volatility around an outbreak is a safe strategy, but you might want to take a look at your favorite stocks and buy more during the dip.
***Louis Navellier advised his readers to consider using this as an opportunity to buy more elite stocks.
Louis’ Growth Investor service focuses on buying stocks with only the best fundamentals (sales growth, earnings growth, return on equity, institutional buying pressure, etc..). He believes stocks with these fundamentals are the best equipped to weather any temporary market volatility.
In the past 10 years, we’ve had the Ebola virus…the “fiscal cliff,” when tax cuts would expire and automatic spending cuts would kick in…and the “taper tantrum,” when the Fed announced it would tighten fiscal policy. (To name just a few!)
Yet the bull market has just kept going. And every time the market pulled back along the way, I told readers to buy.
Here is what Louis wrote during the Ebola virus scare in the fall of 2014. If you remember, the S&P dropped 6% in that period…
“I was in Dallas last Tuesday, where the first U.S. Ebola case was announced. I can confirm that the airport was busy, so the fear that everyone will stop flying planes is simply not true. The truth is that many investors like to ‘react’ first and then ‘think’ second, which significantly impacts the stock market’s direction. But I’m very optimistic.” (Oct. 6, 2014)
By April 2015, the S&P was up 5%, and Louis’s stocks did even better. This week he shared his best Growth Investor trades from the period to support his current optimism.
Ticker Company Country Industry Timeframe Our Result MIC Macquarie United States Transportation 11/19/14 – 3/11/15 +12% CLDT Chatham Lodging United States REIT 10/8/14 – 3/27/15 +22% EW Edwards Lifesciences United States Medical Specialties 10/28/14 – 4/7/15 +18%
So, you can see that InvestorPlace analysts aren’t letting the coronavirus change their bullish 2020 thesis.
As Matt McCall said, “if you feel nervous about the situation, you don’t have to buy on the dip, but you shouldn’t sell either because there are still big gains ahead.”
If you haven’t heard, Matt is releasing his latest research this Wednesday, February 5. It’s something brand new he calls the Microcap Millionaire Project. He’s identified some small stocks he thinks can make investors a boatload of money and you can get Matt’s research absolutely free this Wednesday!
To find out more, click here.
Enjoy your weekend,
Editor in Chief, InvestorPlace