Your regularly scheduled update has been cancelled in order to address the large drawdown this morning in the futures market due to worries about the spread of coronavirus. This morning, at least at the open, the Dow Jones and S&P 500 are expected to open down around 2%.
We have therefore been invited by financial media to suspect that the blended value of 500 of the largest, best financed, most profitable businesses in America and the world has “lost” two to three percent – with more “losses” to come – due to the outbreak in China of a new strain of coronavirus.
Permit me to doubt this, and to suggest that you – as goal-focused long-term investors – join me in doubting it.
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’m reasonably certain that many (or perhaps most) of the world’s leading virologists and epidemiologists are working on it, and I believe that their efforts will ultimately succeed. Clearly, this is nothing more (or less) than my personal opinion.
But if the rich history of similar outbreaks in this century is any guide, this would seem to be a reasonable hypothesis.
I draw your attention to:
SARS in 2003-04, also originating in China
The bird flu epidemic in 2005-2006
In 2009, a new strain of swine flu
The Ebola outbreak in the autumn of 2014
The mosquito-borne Zika virus outbreak in 2016-17
Without belaboring the point: the super-spreader of SARS – a fish seller – checked into a hospital in Guangzhou on January 31, 2003, basically infecting the whole staff. The epidemic exploded from there.
On that first day of the litany of epidemics cited 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.
While we don't want to make light of the seriousness of the virus, especially to those who contract it, we certainly don't think this is a time to panic. Ultimately, there will be a catalyst to nudge the economy into a slowdown. This may or may not be that catalyst.
Ultimately, slowdowns become recoveries and growth again. As always, I welcome your inquiries around this issue. In the meantime, I think the most helpful – and certainly most heartfelt – investment advice I can offer would be that you turn off the television set.
Kind regards, 
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February 24, 2020
