- News of the continued spread of coronavirus — and the recent plunge in oil prices — has sent stocks plummeting toward bear market territory, and bond yields have reached unprecedented lows.
- While the virus represents a new challenge, there is nothing new about market volatility. Markets have survived viral outbreaks in the past.
- Investors who can look past the current environment and stay the course can benefit over the long run.
Rising fears over the spread of the coronavirus have led to a sharp stock market decline as investors grapple with its impact on the global economy. On Monday, March 9, in reaction to news of the virus spread and the recent oil shock, Standard & Poor’s 500 Composite Index fell 7.6%, triggering a 15-minute trading halt. In this interview, Capital Group Chairman and CEO Tim Armour offers his perspective on the latest events, the effect on the US market and economy, and what Capital is doing in portfolios to help guard against market volatility.
1) What is your sense of the coronavirus (COVID-19) outbreak and market reaction?
From being almost unknown at the start of the year, the coronavirus has prompted increasing concerns about the prospect of a global pandemic and its impact on the global economy. People are understandably frightened because this is a new disease, and there is much uncertainty over how it will all play out. First and foremost, the virus has a real human cost. We don’t know how many people are going to get ill or, worse yet, how many may die. Of course, our first thoughts are with the people who have fallen ill and their families.
While this disease is new, there have been many pandemics and other crises in the past, and markets have survived them all. Today, a fair amount of panic has taken hold and I expect in the coming weeks that a rising number of cases may continue to alarm many people. As an organisation, we have been studying the history of pandemics and the pattern that they tend to follow. There tend to be hot spots and flare-ups, and they last for a while, but then they go away. Eventually, the spread of the virus will slow down and people will get back to normal, as will markets.