We have our first surprise of the year: The Coronavirus. Just last month I wrote in my annual forecast that we will be surprised by something this year. This is likely the first of several unexpected, unpredicted events we will experience in 2020.
It’s a good time to take a step back and identify what we know, what we don’t know, what we can control and what we can’t control. Those types of thinking exercises can help us make good decisions.
The Coronavirus is still in its infancy. We don’t know how much it will further spread nor the economic toll it can take. It could be over in a few weeks or months with little economic impact or it could go on for some time and affect global economies. The bigger point is that we have had similar health scares in the past 20 years: SARS, Avian Flu, Swine Flu and Ebola. All of those elicited similar panics in the media and temporary economic impact. As far as the stock market goes, just look what the market has done in the past 20 years despite not one, but several global health care scares.
If the flu worsens, corporate earnings could be impacted, and the stock market will remain weak and in a downtrend. But, if it is anything like the past, it would be temporary. Therefore, during market sells off, we should be looking at good entry points to buy high quality stocks on sale. At the very least, look for good opportunities to rebalance portfolios. Economic and stock market crises may be scary in the moment, but they provide lower prices for investors that actually want to “buy low”.
Turn on any media today and the headlines are dominated by Coronavirus and election forecasting. What if neither was happening? What would they be talking about? And what happens when the election cycle and Coronavirus run their course? What will the media talk about then? I don’t know – except, I know they will find something and make it seem like a very big deal. The following charts  will hopefully provide important context.
It should not be a surprise that cardiovascular diseases (17.79 Million) and cancers (9.56 Million) are the leading annual causes of death globally. While flu is a concern, no one is predicting that the coronavirus is going to kill 27 million people every year, but it is dominating the news 24/7 right now. To my larger point, the news does not truly represent what we actually die from. The following study and chart pulls back the curtain and reveals the media will over represent certain causes of death and that creates a “disconnect”  between what we see on the news vs. what we actually die from. It also sells headlines based on fear, just as we know how negative stock market coverage does.
The important takeaway here is that we can’t control the news. We can’t control how other investors behave. But we are in complete control of what we choose to pay attention to and how we choose to respond. Choose wisely
 Hannah Ritchie and Max Roser (2020) - "Causes of Death". Published online at OurWorldInData.org. Retrieved from: 'https://ourworldindata.org/causes-of-death' [Online Resource]
©2020 The Behavioral Finance Network. Used with Permission