Coronavirus and your portfolio

With mounting fears around the Coronavirus, the last few weeks have been turbulent for the stock market. As of the writing of this letter, the disease has infected an estimated 73,000 people, and fatalities currently stand at ~1,800.

The disease was first reported in December 2019 in Wuhan, China. As the number of infections and death toll quickly rose, the World Health Organization declared it a public health emergency on January 30, 2020. The Chinese government has undertaken significant measures to contain the virus by locking down travel to and from the epicenter of the disease, shutting down schools and extending the holidays around the Chinese New Year.

Although cases of the virus have been reported in other countries, the cases outside China have been fairly contained. The number of cases within the U.S. currently stands at 15, with no fatalities reported. 

Why is this impacting the stock market?

The fear for the stock market is that all the measures taken to contain the disease will lead to a slowdown in economic activity and hurt business results. You might be thinking, that makes sense for why the Chinese stock market is down, but why does it impact the global market?

Today, global supply chains are increasingly interlinked, and many manufacturing activities take place in China. If Chinese factories’ outputs decline, that has an impact on firms that supply inputs for production (e.g., oil prices experienced a sharp drop in January as fears hit regarding the virus outbreak). It also has an impact on the results for U.S. companies that manufacture their products in China and experience interruptions in supply.

Based on past experiences of epidemics, the slowdown in economic activity can rebound sharply as fears dissipate and normal economic activity resumes. The actual economic impact is difficult to predict and depends on how severe the outbreak is and how quickly it can be contained. One study by Goldman Sachs estimated the impact on global GDP for 2020 to be a decline of between 15 to 30 basis points, depending on the severity of the outbreak.1

What type of impact could the Coronavirus have on the stock market?

The next question, then, is what type of market impact should we expect? Market data on past disease pandemics shows that in the first few weeks following an outbreak, bonds (represented by U.S. treasuries) tended to have positive performance, but over the longer-term, stocks (represented by the S&P 500) performed better.2 What this tells us is that staying invested is likely an investor’s best course of action.

Immune world epidemics and global stock market performance

Source: Decambre, Mark, “How the stock market has performed during past viral outbreaks, as coronavirus infects 31,000,” MarketWatch, February 7, 2020,

The above graphical representation of the MSCI World Index going back to 1970, with notations for various world epidemic diseases, shows the stock market’s performance through past disease outbreaks.

The key take-away here is that, while the human impact of the Coronavirus is worrying, we don’t recommend any changes to your portfolio. History indicates markets have the resiliency to overcome these types of events.

If you have further questions about how the Coronavirus may impact the U.S. and global stock markets or how to construct a portfolio designed to weather such events, contact Wipfli Financial Advisors.

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Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services, fees and conflicts of interest is set forth in Wipfli Financial’s current Form ADV Part 2A brochure and Form CRS, copies of which are available from Wipfli Financial upon request at no cost or at Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Rafia Hasan

CFA, CFP® | Principal, Chief Investment Officer

Rafia Hasan, CFA, CFP®, is the Principal and Chief Investment Officer for Wipfli Financial Advisors, based in Chicago, IL. Rafia leads Wipfli Financial's Investment Committee and has a deep knowledge of the financial markets, specifically in the areas of alternative investments and private equity. She also specializes in personal financial planning and estate planning for women investors.

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Coronavirus and your portfolio

time to read: 2 min