Historically, Stocks Have Quickly Rebounded From Disease Outbreaks

Historically, Stocks Have Quickly Rebounded From Disease Outbreaks

Coupled with an oil price war breaking out between Russia and Saudi Arabia, panic over the Coronavirus immediately sunk stocks to the lowest they could fall before circuit breakers kicked in on Monday morning. As of writing, the Dow is town over 1,800 points on the day, and 5,500 points off its all time high. The S&P 500 suffered a similar decline when measured in terms of percentages instead of points.

While it is impossible to predict the future, a review of how stocks have performed in past disease outbreaks shows that they tend to recover within six-months more often than not.

As CNBC reported: Stocks were down 2% in the immediate wake of a 2010 cholera outbreak, which eventually sickened more than 6% of Haitians. Six months later? They were up more than 13%.

In 2016, the Zika virus, linked to birth defects in the babies of mothers infected while pregnant, tore through Latin America, the Caribbean and the U.S. The global stock market shed 6% a month after Zika took off. But six months later? It was down just around 0.6%.

The deadly Ebola virus that broke out two years later dragged global stocks down more than 7%. Just half a year later, much of that decline had been reversed, too.

Below is charted the market’s immediate reactions during various virus emergencies. Note that their Coronavirus market reaction data is now out of date, as the CNBC article’s data is as of February 24th. The S&P has now declined approximately 15% since January.

And how quickly markets have recovered one month, and six months out, is charted below:

The SARS and Zika outbreaks brought about the most drastic market declines (nearly) on-par with the Coronavirus related declines. In the case of SARS the markets rebounded from a 12.8% decline to a 21.5% gain after six months, while losses from Zika were cut from a 12.9% decline to only a 0.6% decline after six months.

 

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