Back in May 2003, in the midst of the SARS outbreak, I boarded a plane to America. I remember quickly realising I was the only person travelling without a mask, which seemed temporarily alarming. But by the time I landed, it was all about the adventure.
Not so much for the global financial system, though.
The 2003 SARS outbreak is estimated to have depleted the world’s economy by US$40 billion.
This was caused by reduced travel, declining patronage in retail outlets and restaurants, stalling technology exports, and then the kicker: weak economic growth in major industrialised economies. (However, it’s worth noting that the global economy was also reeling from the war in Iraq, and general geo-political tensions at the time.)
Right now, we seem to be suffering from a similar crisis.
This week, the global stock market has entered correction territory, with most of its 2020 gains wiped out due to panic over COVID-19, more commonly known as the coronavirus.
So, what’s going on?
To start, some well-known global companies have warned of hits to trading. For example, Apple CEO Tim Cook said the outbreak was a “fairly dynamic situation” and Apple revised its March quarter revenue guidance earlier this month.
Also, the World Health Organisation (WHO) reported the number of new cases outside of China in one day was larger than those reported inside China. In other words, the virus is spreading to new locations in large numbers, and thus setting off alarms everywhere.
All this has renewed fears about a global economic slowdown, which in turn means there’s a lot of noise around about crashes and pullbacks and so on.
So, what’s an investor to do?
Berkshire Hathaway CEO and one of the world’s most famous investors, Warren Buffett, has said he believes investors shouldn’t sell stocks based on “today’s headlines.” He even went so far as to say he’d be “more inclined” to buy stocks at lower prices.
If you were an investor in 2003 — when SARS hit — you would have seen stocks bottom out over about a three-month period. Likewise, it took about three months for those same stocks to achieve their previous highs. Other virus outbreaks — swine flu, bird flu, and ebola — have similarly influenced markets over the years, but history has shown they typically rebound.
At Spaceship, we believe in the value of long-term investing. We’re not changing what we’re doing; we know markets go up and go down at times.
We have a minimum suggested timeframe of five years for holding any investment in a Spaceship Voyager fund. Generally, when equity investments are held for longer periods they tend to exhibit lower volatility than those held for shorter periods.
Naturally, you should make your own decision, because there is no way to predict how coronavirus will pan out, and of course, past performance is not a guide to, or reliable indicator of, future performance.