The Coronavirus Infects the Stock Market: What You Need to Know

The Dow: It’s gone from a record high to a decline of more than 10 percent in just a few days. And there’s one — and only one — thing to blame for it: coronavirus.

Yes, despite President Donald Trump’s best attempts to calm any fears over the potential spread of the deadly virus in the United States, investors are taking notice of what the Centers for Disease Control and Prevention (CDC) is stating — and they’re acting accordingly to these somewhat dire warnings.

The Historic Drop

As of Thursday, February 27, the major markets are dipping closer to “correction territory.” On Thursday alone, the Dow dropped by nearly 1,200 points (it’s biggest single-day dip ever), the S&P slid about 4.5 percent, and the NASDAQ Composite dipped by 4.6 percent. In fact, February 27 was the Dow’s single worst day in about two years, and the NASDAQ and S&P had their respective largest single-day dips since the summer of 2011.

But despite the tumultuous week on Wall Street, it’s important to remember a couple of things when it comes to the coronavirus. One, this is all likely just an example of short-term concern (though it could turn into long-term concern). And two, while it does seem that widespread cases in the United States are inevitable, we don’t really know yet how it’s all going to play out.

How Will Coronavirus Play Out?

Despite what many pundits are saying in an attempt to calm any fears, it’s very important not to overestimate the potential of the coronavirus. And while all indications are that a known case in northern California could lead to a community-like spread of the disease, there are a couple of things that we need to keep in mind when it comes to everything:

  • The United States has the best medical care in the world, and the funds are being appropriated to adequately fight this disease’s spread and treat those who are impacted by it.
  • Symptoms in the vast majority of people are mild, which is both a good thing and a bad thing. On one hand, it’s a good thing that the majority who contract it will recover. But on the other hand, mild symptoms can make it harder to detect and appropriately quarantine those effected to impact its spread.
  • The mortality rate is in the low single digits, which is a good thing. However, the fact that there is a mortality rate at all is concerning. That’s why this disease cannot be overestimated. Any time there’s a large population of people impacted and people are dying, it must be taken seriously.

The bottom line is that the coronavirus is something that needs to be taken seriously, but at the same time, the market is currently just reacting largely to the unknown. As the big picture becomes more clear in the United States, and solutions are put into effect, the market is likely to recover.


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