February 28, 2020

Our View on the Coronavirus Outbreak and Its Economic Effects

Dear Client,

Over the past few trading sessions there has been increased volatility. We believe this volatility is primarily related to the Coronavirus outbreak and its short-term effects on the global economy. If this is creating any anxiety for you, please read on for our view and our actions.

In the fourth quarter of 2019, the Dowling Group portfolio managers adjusted our client portfolios in anticipation of the coming volatility in the markets. We consider research from top analysts, economic data points, and recommendations from our portfolio managers when we make these portfolio changes.

It is important to note that the total return of the S&P 500 in the same year as a virus outbreak has yielded a positive total return for that year.

Key virus outbreaks to be considered:

Virus Date Range Trading Days S&P 500 Change S&P 500 Total Return for Year
SARS Jan 2003–Mar 2003 38 -12.80% 2003 = +28.68%
Avian Flu Jan 2004–Aug 2004 141 -6.90% 2004 = +10.88%
MERS Sep 2012-Nov 2012 43 -7.30% 2012 = +13.41%
Ebola Dec 2013–Feb 2014 23 -5.80% 2014 = +16.00%
Zika Nov 2015–Feb 2016 66 -12.90% 2016 = +11.96%
Coronavirus Jan 2020–Present 39 -7.79%* N/A

* As of 02/27/2020 4:00PM EST

Source: CNBC, Citi Research, FactSet, Koyfin, YCharts

All the major viruses mentioned above have had The World Health Organization, The Center for Disease Control, and leading pharmaceutical companies come together to contain the outbreak. We understand that short term volatility in the markets can cause anxiousness, but we want to remind our clients that we are generally investing for a long time horizon. As history has proven, the markets usually tend to bounce back.

Please reach out to us if you would like to discuss these recent events or anything else we can be of assistance with. As always, thank you for your trust in our process and our people.

Best regards,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

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  • Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
  • Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
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