Special Update: Coronavirus

Volatility has surged in the financial markets, as investors react to the potential economic and earnings fallout from the rapid global spread of the coronavirus. Over the past month, equity markets have dropped sharply as new cases of the coronavirus burgeon around the world. As of this writing, there are over 200,000 cases of coronavirus worldwide, 100,000 of which are still “active cases.” In the United States, there are approximately 7,000 coronavirus cases.  

Markets have been aware of the coronavirus since late 2019; however, through January and most of February, it was not a material negative influence on U.S. stock or bond markets because almost all the active cases were in China. And via extreme quarantine measures in that nation, it was assumed the virus would be mostly contained. That assumption proved false, and beginning around February 19, the number of active cases began to dramatically accelerate in South Korea, Iran, and Italy. That swift spike in new coronavirus cases outside of China resulted in a sharp drop in stocks in late February.

Finally, in the days leading up to this writing, stocks have dropped even further in response to the extreme social distancing measures being implemented across the country. These measures, which include the cancellation of virtually every major sports season, travel bans from Europe and parts of Asia, the closing of bars and restaurants, the mass instituting of work-from-home practices, school closures, and curfews, are intended to stop the spread of the coronavirus. Yet they also will have a significant and negative economic impact on the travel, leisure, beverage and restaurant industries to name just a few of the segments that will be hardest hit. The cumulative impact of these measures materially increases the chances of a recession in 2020, which is something virtually no one thought possible just six weeks ago.

Positively, the U.S. government is acting to support the economy and that support has ramped up dramatically in the last few weeks. There are two economic supports bills that are currently making their way through Congress and a third has already become law. Each is designed to help a portion of our population bridge the economic gap until the spread of the virus peaks and begins to decline.  

The Federal Reserve, meanwhile, has cut interest rates to zero percent to help the economy. The Fed also has implemented several important measures to provide short-term cash for corporations and to ensure there’s plenty of capital for the broader banking system. Those measures are working to help keep the banking and financial systems functioning in an orderly manner.

Yet despite this support, which is an important economic positive, the world understandably looks very scary to many people right now.  Across the nation, and the world, roads are mostly empty, office buildings are vacant, schools are closed and normal life as we have known it has largely shut down. Yet it’s important to remember that this historic market volatility, along with these societal disruptions, are temporary. At some point, the spread of the virus will peak and begin to recede.   Similarly, these social distancing measures, while unsettling, are also only temporary. Our children will once again return to school and adults will return to work. Air travel will resume, cruise ships will set sail again, and the U.S. economy, which is by far the most flexible and resilient in the world, will recover.

Over the past several weeks, we’ve witnessed near panic, both in regular society as well as financial markets. That panic has been driven by fear of unlikely events such as national quarantines, food shortages, and significant death tolls. But as we all know, the worst thing to do during a panic is to panic. That’s because panic leads to hasty, short-term decisions that jeopardize your long-term best interests.  

As has been said many times, we are all in this together.  So safely help your neighbors and the elderly.  Support your local restaurants and shops.  Order take-out when you can or buy gift certificates if you are able.  All will help our communities survive in the short-term so we can emerge stronger than ever when this is over.  On that note, I thought I’d leave you with this writing that I recently ran across that I hope can help bring some peace in these trying times.

LOCKDOWN
Yes there is fear.
Yes there is isolation.
Yes there is panic buying.
Yes there is sickness.
Yes there is even death.
But,
They say that in Wuhan after so many years of noise
You can hear the birds again.
They say that after just a few weeks of quiet
The sky is no longer thick with fumes
But blue and grey and clear.
They say that in the streets of Assisi
People are singing to each other
across the empty squares,
keeping their windows open
so that those who are alone
may hear the sounds of family around them.
They say that a hotel in the West of Ireland
Is offering free meals and delivery to the housebound.
Today a young woman I know
is busy spreading fliers with her number
through the neighborhood
So that the elders may have someone to call on.
Today Churches, Synagogues, Mosques and Temples
are preparing to welcome
and shelter the homeless, the sick, the weary
All over the world people are slowing down and reflecting
All over the world people are looking at their neighbors in a new way
All over the world people are waking up to a new reality
To how big we really are.
To how little control we really have.
To what really matters.
To Love.
So we pray and we remember that
Yes there is fear.
But there does not have to be hate.
Yes there is isolation.
But there does not have to be loneliness.
Yes there is panic buying.
But there does not have to be meanness.
Yes there is sickness.
But there does not have to be disease of the soul
Yes there is even death.
But there can always be a rebirth of love.
Wake to the choices you make as to how to live now.
Today, breathe.
Listen, behind the factory noises of your panic
The birds are singing again
The sky is clearing,
Spring is coming,
And we are always encompassed by Love.
Open the windows of your soul
And though you may not be able
to touch across the empty square,
Sing.

Richard Hendrick
March 2020

Jeff Spitzmiller is the CEO of Ohana Wealth & Life Planning based in Cincinnati, OH.   Ohana specializes in life and financial planning along with ESG (Environmental, Social, Governance) investing principles.   The firm is an independent financial advisor and a fee-only fiduciary.  Jeff and the firm also enjoy volunteering and giving back to the local community.  You can reach Jeff at jeff@ohanaplanning.com.