February 3, 2020
I hope you and your family are off to a good start in 2020 and have avoided the flu that is rampant.
On Friday, January 17th, after a spectacular run up that started the day after Christmas 2018, the S&P 500 index closed at 3,329.62. Two weeks later to the day - last Friday, January 31st- the Index closed a little over 3% lower at 3,225.52. (more than half the damage was done on Friday).
We have been "invited" by the financial media to suspect that the blended value of 500 of the largest, most profitable businesses in America and the world has "lost" three percent- with more "losses" to come- due to outbreak in China of a new strain of coronavirus.
I do not claim to have any idea how far this outbreak will spread, nor how many lives it will claim, before it is brought under control. I am certain that many of the world's leading virologists and epidemiologists are working on it, and I believe that their efforts will ultimately succeed. This is nothing more than my personal opinion.
If the history of similar outbreaks in this century is any guide, this would seem to be a reasonable assumption. A few that come to mind:
-SARS in 2003-2004, also originating in China
-Bird Flu epidemic in 2005-2006
-a new strain of swine flu in 2009
-Ebola outbreak in 2014
-Zika virus outbreak in 2016-2017
On the first day of the list of epidemics listed above, the S&P 500 closed at 855.70. Seventeen years and six epidemics later (including the current one), this past Friday the index closed fairly close to four times higher. I'm confident that you see where I'm going with this.
As always, I welcome your questions and concerns around this issue. In the meantime, I think the most helpful investment advice I can offer would be that you turn off the television set.
Sincerely,
Bain
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.