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Markets In Perspective

Markets In Perspective 

Indeed, global markets have shrugged off the impact of past viral outbreaks. While the past is not predictive of the future, it does offer valuable perspective. 

“History may not repeat, but it does rhyme,” notes McCabe. “There is nothing exactly like the coronavirus. We don’t really know how this is going to play out. But you can compare it to SARS to help put things in perspective. What have we seen in the past that may help us look at current conditions more rationally?”

No one knows how long or of far the coronavirus will spread, but here is a brief look at how three recent infectious outbreaks unfolded:
 

  • 2003 — SARS saw 8,000 people infected. It was brought to an end by good hygiene (hand-washing) and environmental factors (warming temperatures), and it burnt out when enough people became infected to build an immunity to the disease.
  • 2009 — H1N1 Flu caused a pandemic in ‘09 and has become a seasonal flu, usually recurring in the colder months.
  • 2014 — Ebola in West Africa ended with human intervention, when the WHO declared a coordinated international response. Countries worked together to administer to the sick, and when a second outbreak occurred in 2018, human intervention made the difference again when treatments developed from the first outbreak were offered to patients.

Table with a headline “Market downturns happen frequently but don’t last forever” that shows the average frequency and length of market downturns in the S&P 500 from 1950–2019. Declines of 5% or more occur about three times per year and average 43 days in length. The last one occurred August 2019. Declines of 10% or more occur about once per year and average 112 days in length. Declines of 15% or more occur about once every four years and average 262 days in length. Declines of 20% or more occur about once every six years and average 401 days in length. December 2018 is the last time a decline of at least 10%, 15% or 20% occurred. Sources: Capital Group, Standard & Poor’s. Average frequency assumes 50% recovery of lost value. Average length measure market high to market low.

“The chart shows that global equity markets have navigated through seven major viral outbreaks from 2001 to 2020, including SARS, the Avian flu, the Swine flu, MERS, Ebola, Zika and the Wuhan coronavirus. Global equity markets are represented by the MSCI All Country World Index. Sources: Centers for Disease Control and Prevention, RIMES, MSCI. Data as of March 2, 2020. Chart is shown on a logarithmic scale. Total return index levels in U.S. dollars, indexed to 100 on December 31, 2000. Disease labels are estimates of when the outbreak was first reported.

The markets have responded in the real estate sector because of the Corona Virus and politics. Many real estate investment owners are selling their properties before the capital gains tax rate increases. Some people are leaving high tax states and moving to more tax friendly states. With this high demand, people are getting top dollar in this real estate environment. If they are trying to utilize a 1031 exchange for their investment product, they are having a tough time finding a replacement property.  Because of the low inventory of real estate, we help clients with their 1031 exchange into a Delaware Statutory Trust investment product

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