For the 11th time in the past 50 years, global equity markets paused to assess a developing health concern. The spread of the latest coronavirus strain rekindled memories of the severe acute respiratory syndrome (SARS) and the Middle East respiratory syndrome coronavirus (MERS) that also prompted global health and economic concerns.

If past is prologue, time should cure whatever ills the present health scare generates for the stock market.

Health Fears Go Viral

The decision to quarantine two Chinese cities and restrict travel throughout the country immediately raised concern that the virus outbreak could blunt the budding revival in China’s economic growth. The restrictions imposed in China were implemented just ahead of the nation’s celebration of the Lunar New Year that traditionally generates significant economic activity.

Fear of the spread of the current virus and its possible economic impact riled global equity markets. This was most evident in the stock prices of airlines and other travel or international commerce stocks.

Context relative to the current health concern is important. In the year for the most recently available data, the Centers for Disease Control and Prevention (CDC) shows 2,813,503 deaths occurred in the United States from all causes. Influenza and pneumonia accounted for 55,672 of this total. On the other hand, the SARS outbreak infected 8,098 people and caused 774 deaths in 2003. The World Health Organization (WHO) determined that MERS afflicted 2,949 globally that resulted in 858 deaths.

What History Shows

Although all illnesses and deaths related to these viruses are regrettable, the economic impact from the prior coronavirus-like illnesses was minimal.

Nonetheless, the prior virus outbreaks generated reactions in global equity markets. During the height of the SARS scare, from peak to trough, the S&P 500 fell 14.31%, but in approximately 57 trading days the S&P 500 recovered the entire decline and eventually moved 200 points (approximately 25%) above the SARS low. Exactly one and two years later, the S&P 500 was 40% and 50% respectively above the SARS low.

MERS was more consequential from a heath standpoint, as a third of patients contracting the illness perished. MERS, also known as camel flu, however, largely was contained to the countries in and near the Arabian Peninsula. The equity reaction was muted compared to the SARS situation. Other than a brief period of downside volatility in the first half of 2013, the S&P 500 moved notably higher through the year.

The influenza pandemic associated with swine flu lasted from early 2009 to late 2010, but during the episode, the S&P 500 moved virtually straight up. Ebola had the greatest lethality, as on average 50% of infected persons died. Containment largely within West Africa, however, minimized the economic and equity market effects.


The current coronavirus outbreak coincided with the U.S. equity market susceptible to an interim pullback, which increased sensitivity to any negative news. As of Friday, January 24, 2020, however, the S&P 500 was only 1.68% off its recent high, but increased short-term volatility would not be surprising. Unless new evidence surfaces that the current virus is more contagious or more deadly than previous versions, it should have minimal economic impact.

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