Coronavirus and the stock market

If you have watched the news lately, you already know that the world is getting crazy about COVID-19, also known as Coronavirus. This has not escaped the stock market, with the NYSE and the TSX both down more than 10% over the last few weeks. It's still unclear when the situation will go back to normal, if we'll actually get into a recession rather than just a temporary drop, and when Costco will drop selling out on toilet paper. But one thing for sure, is that all of those things are linked.

The virus has forced the close-down of many cities around the world, mostly in China, as governments try to contain the spread of the virus. Healthcare systems around the world are getting tested, and millions of companies are reacting by updating their policy and changing their habits to reduce travel and face-to-face gatherings. The name of the game here is contagion, or how to prevent it. All of this threw a wrench in an otherwise fired-up market, as investors brace for the lower profits this whole situation will bring. Will it drop further? Who knows. Certainly not me, or anyone else for that matter. Anyone one telling you the world is ending knows exactly as much as me, the only difference is I know the extent of my knowledge.

That's just for the facts though. The other side of this story, which usually has a much higher impact on stock markets, is emotions. People are truly freaking out, doing the exact opposite of what they should do: selling in the storm. What makes sense and what feels good are sometimes polar opposite, and that's not restricted to investments. Ask this cat. He knows what's up.

While a rare sight in Western countries, in some culture it's very normal to wear a mask when you're sick. And it's a great idea: they reduce the chance of spreading your illness to everyone around you. As a society, this has great value with very little downside. You don't wear a mask to protect yourself, you wear one to protect others.

What was the point of this whole article? Nothing really, the world will not end, the stock market will recover, and we will return to a normal life. Unfortunately there has been casualties, and will probably continue to do so until we find a vaccine. But nothing that warrants changing the cap on your investments. So please, next time a bad situation happen, please think carefully. Don't do something just because everyone else is doing it, and think about your action (and their consequences) before going too far. Apply to your investment as required.