Clearly, life as we know it has hanged dramatically in an unprecedented response to the latest novel coronavirus outbreak. After a slow start, the United States has shifted into high gear in the battle to retard the spread and severity of this unexpected threat.
The mass closures of schools and churches, cancellation of concerts and sporting events, and the reduction in travel and shopping will almost certainly cast the U.S. economy into a recession.
In assessing the outcome, there are no exact parallels, but previous crises can provide some useful and generally optimistic clues as to how investors might respond and why they should not panic.
Without doubt, the market’s mercurial volatility over the past three weeks has been mind-bending. With the initial understanding that the outbreak would impede global growth, market watchers began reducing and then eliminating estimates of profits for 2020, triggering the first wave of selling.
Then investors began to comprehend the magnitude of unpreparedness on the part of the federal government, exacerbated by public statements replete with denial and mischaracterizations that sapped confidence and accelerated the market rout.