This week, I’m talking about the coronavirus and its potential impact on your investment portfolio and the economy. 

Today, we’re de-briefing on what’s happened so far to stocks and the stock market and what the likely impact is on stock markets. 

Let’s start by putting this recent drop into perspective. As I mentioned yesterday, as I write the tips for this week, the DJIA is down more than 12% over the last week due to concerns over the coronavirus. 2 of those days involved drops of over 1,000.

With China manufacturing and their economy being so important to the world economy, it will no doubt have an impact there and a ripple effect to other economies around the world, including here in the U.S. 

One of the other problems with the timing of this shock to the markets and the world economy is that most economies around the world are slowing down. Here in the U.S. 1st quarter GDP (otherwise known as the growth rate of the economy) is expected to be about 1-1.5%. Our economy has been growing, but growth has slowed, so the impact of the coronavirus on certain industries and the economy as a whole could be the straw that broke the camel's back. When the economy is growing at 3-4% it’s more resilient to shocks like this, compared to the current low growth. When we’re only growing by 1-1.5%, shocks like this can be enough to push the economy into a recession. 

I don’t have a crystal ball and my magic 8 ball told me to “concentrate and ask again” when I asked for it’s prediction, so I have no idea what this pandemic means for the economy or your portfolio long-term. 

It really depends on the severity of the pandemic. If life in China and around the world can return to normal relatively soon, then it’s unlikely to create any serious long-term economic or market impacts. But it’s also possible that the coronavirus could continue to worsen and if it does, you may not like what you see when you look at your 401k and investment account balances over the coming weeks or months. 

With that said though, shocks like this are actually very common and even though it’s tempting to sell everything and hide it under your mattress, if history is any indication, often shocks like this are just temporary and nothing to panic over. In fact in the 35 years from 1980 to 2015, despite finishing up for 27 of those 35 years, the stock market dropped during the year an average of 14.2%. That’s worth repeating. During a 35 year time period, you could expect double digit drops during the year, even though the stock market finished up the vast majority of the time. 

Because the reality is, if it’s not coronavirus, it’s SARS or a government shutdown, or natural disasters, terrorist attacks, a sovereign debt crisis, or a trade war. 

Hopefully when you realize that a shock like the coronavirus is nothing new and unlikely as of right now to send the economy and the stock market into a deep dive, you can better equip yourself emotionally for the ups and downs while the crisis du jour gets sorted out.

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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