March 9, 2020

The Coronavirus Market Meltdown Continues – Two Ways to Place the Volatility in Context

This morning global equity markets continued the recent volatility around the Coronavirus’ human and economic impacts.  As of this morning, the S&P 500 is trading down roughly 5% and since February 20th, 2020, the S&P is down roughly 17%.   The uncertainly around the virus and the volatility of equity markets are reasons for investors to be concerned.  However, it can be helpful to take a step back and look at the current market volatility in context.  Below are two charts that can help us take a broader view and make it easier to stick with our investment plans.


Chart 1 – $100,000 Investment – August 14th, 2019 – March 9th, 2020

Source: Kwanti


Large U.S. stocks as measured by the S&P 500 were up over 31% in 2019 and almost 5% year-to-date before the Coronavirus crisis began.  Cumulatively, since January 1st, 2019 through Feb 20th 2020, the market was up over 36%.

One way to put the current market volatility in context is to go back to the last time the S&P 500 was around this level.  It turns out we only have to go back to August 2019 to see the market at the same price level as we see today.  A $100,000 investment in the S&P 500 through the SPY exchange traded fund would be roughly flat assuming we invested in mid-August 2019 and held through today.


Chart 2: Comparing Market Crises

Source: Kwanti


Another way to put things in context is to compare the Coronavirus market decline to other recent market declines including the early 2000 technology bubble, the 2008 financial crisis and the very recent Q4 2018 selloff precipitated by concerns about slowing economic growth and trade tensions with China.  While the first two periods were considerably longer than we have experienced so far with Coronavirus, the data help give us a sense of the relative magnitude of other market corrections compared to Coronavirus.

While the market volatility is likely to continue for some time, remember to take a step back from the headlines and focus on the key investment principles that worked during prior market declines.

  • Stick to your investment plan
  • Rebalance to your target allocations
  • Stay diversified
  • Control what you can control and let the rest go