How to Invest During a Pandemic

When I was younger, I would travel great distances to ride a good roller coaster. I remember going down to the state line to ride the Desperado at Buffalo Bill’s. That was then. Now, I no longer like roller coasters—the last one that really did me in was the Guardians of the Galaxy ride at Disneyland. I was sick to my stomach for nearly an hour afterward—never again!Lately, the stock market has been going up and down like a roller coaster as fear has gripped the market—just two days ago, the market plummeted only to have most of the losses recover today. When your life savings and retirement are being subjected to these kinds of swings, it can be hard to keep your lunch down, but bailing on the market could prove costly.How Have Markets Reacted in the Past?Epidemic1-Month3-Months6-MonthsPneumonic Plague-2.79%-4.67%-4.30%SARS+8.64%+16.39%+21.51%Avian Flu-0.18%+2.77%+10.05%Swine Flu+10.9%+19.73%+39.96%MERS-0.29%+2.15%+8.58%Zika-6.05%-0.88%-0.57%Ebloa-0.09%+2.37%+4.37%Average+1.45%+5.41%+11.37% Source: Charles SchwabHistorically, the stock market has reacted with short-term volatility when there are virus outbreaks, epidemics, and pandemic. However, in the longer term, these periods of volatility have always been fleeting.A closer look at more recent outbreaks unveils a similar pattern to what we’re seeing today. Historically, the number of confirmed cases in various epidemics has tended to rise sharply for 8 to 10 weeks, then peaked. A short-term dip in stocks generally accompanies the initial (frantic) rise in confirmed cases, with a recovery in prices as the situation comes under control. Over a 38-day trading period during the height of the SARS virus back in 2003, the S&P 500 index fell by -12.8%. During the Zika virus, which occurred at the end of 2015 and into 2016, the market fell by -12.9%. Panic-selling episodes happen, but they have never lasted.Even though it was only 10 years ago, many people forget the scope and gravity of the Swine Flu pandemic. The Centers for Disease Control estimates that from April 12, 2009 to April 10, 2010, there were 60.8 million cases, 274,304 hospitalizations, and 12,469 deaths in the U.S. alone. Globally, the numbers approached 1 billion infected and some 280,000 deaths.4 But as the virus spread and hysteria enveloped the media and the world, the S&P 500 was beginning one of the biggest bull runs of all time. Selling into the Swine Flu pandemic would have been a mistake.A closer look at more recent outbreaks unveils a similar pattern to what we’re seeing today. Historically, the number of confirmed cases in various epidemics has tended to rise sharply for 8 to 10 weeks, then peaked. A short-term dip in stocks generally accompanies the initial (frantic) rise in confirmed cases, with a recovery in prices as the situation comes under control. Over a 38-day trading period during the height of the SARS virus back in 2003, the S&P 500 index fell by -12.8%. During the Zika virus, which occurred at the end of 2015 and into 2016, the market fell by -12.9%. Panic-selling episodes happen, but they have never lasted.Even though it was only 10 years ago, many people forget the scope and gravity of the Swine Flu pandemic. The Centers for Disease Control estimates that from April 12, 2009 to April 10, 2010, there were 60.8 million cases, 274,304 hospitalizations, and 12,469 deaths in the U.S. alone. Globally, the numbers approached 1 billion infected and some 280,000 deaths.4 But as the virus spread and hysteria enveloped the media and the world, the S&P 500 was beginning one of the biggest bull runs of all time. Selling into the Swine Flu pandemic would have been a mistake.The Bottom LineI do not believe we’re out of the woods yet, and all investors should be prepared for more roller-coaster-like volatility. However, similar to selling during the Swine Flu pandemic, I believe that selling during the Coronavirus pandemic will be a mistake. Now is not a time to panic. Now is a time to keep a cool head and continue with your long-term investing strategy.I began my investing career in December 2008—right before the market plunged. I lost 70% of my portfolio in three months! That period of time felt similar to the markets now, but because I didn’t jump out of the market, my portfolio was able to recover by the end of 2009.Remember, jumping out of the roller-coaster in the middle of the ride would be worse than staying in the ride, even if you don’t like it!ABOUT STERLING WEALTH MANAGEMENTI began investing during the 2008-2009 stock market crash—it was crazy! I remember losing most of my life savings in the market and then working hard the rest of the year to earn it back. It was a tough way to learn about investing—that’s when I decided that I didn’t want others to go through the pain that I did.I started my independent RIA firm, Sterling Wealth Management, in 2018 so that I could provide investment counsel and advice to my clients (especially during tough times). I am currently licensed as a Nevada Investment Advisor (CRD #6720246) and Nevada Real Estate Broker (B.1002148.LLC).If you’d like to start a conversation about your wealth, please feel free to contact me at (702) 228-0500.