What the History of Pandemics Says About the Wuhan Virus and Stocks

Flu panics can make markets wobble, but they haven’t caused bear markets.

The Wuhan coronavirus has officially hit the US, extending the deadly outbreak that started in China and has since spread to Taiwan, Korea, Japan and Thailand on the eve of the Lunar New Year—a peak Asian travel season. As is typical when new infectious diseases appear, headlines are linking the outbreak to market volatility and warning of a more severe impact. Those who have been investing for a while are probably now thinking back to 2002 – 2003, when pundits warned the SARS (severe acute respiratory syndrome) outbreak would hit markets. Over the years, we have also seen similar handwringing about bird flu and swine flu impacting stocks. Last decade’s Ebola outbreak sparked fears for Frontier Markets. Yet history has overwhelmingly shown markets typically move on quickly from disease-related pullbacks, and even the most severe outbreaks haven’t caused bear markets.

We can see the logic behind disease-related fears. If a big chunk of the world’s population is sick in bed (or worse), they aren’t making the economy go. It is natural to anticipate this showing up in economic data, and it isn’t surprising that markets might price this in real-time. We remember back in spring 2009, when the economy was still in recession and stocks were just starting to recover from the financial crisis, when swine flu broke out. Headlines were sure it would spiral into a deadly global pandemic, derailing the nascent recovery. One of your friendly MarketMinder editors caught it that summer and made zero economic contributions for a week. But the market impact was muted—a -4.9% S&P 500 drop from May 8 – 15 (when the fear first hit) and a -7.0% pullback from June 12 – July 10 (as the casualty tallies in America and Europe rolled in).[i] Zoom out, and it was part of a two-month flat stretch in an otherwise gangbusters year. The recession ended that summer. While researchers eventually estimated the death toll at 100,000 – 200,000—tragic—that was far below the millions of casualties people initially feared.

Stocks were similarly resilient when SARS broke out. That virus, much like today’s, was a coronavirus that emerged in China and caused respiratory infections. The World Health Organization estimated its fatality rate at 14% – 15% of all reported infections, with 774 confirmed deaths between November 2002 and 2003. We still remember the heightened media coverage and the run on surgical masks as folks rushed to protect themselves. As with the swine flu panic, stocks were also in a nascent recovery from the bear market that ended in October 2002, and the S&P 500 endured a -14.2% correction from November 27 – March 11.[ii] SARS wasn’t the only thing hitting sentiment at that time, as stocks were also contending with the run-up to the second Iraq war. But the market’s rise resumed, and the S&P 500 returned 28.7% that year.[iii]

Even bigger pandemics haven’t derailed markets. For instance, the CDC estimates the 1957 – 1958 bird flu pandemic killed 1.1 million people globally, including 116,000 in the US. When the outbreak began in February 1957, stocks were already in a bear market that began the previous August tied to the Suez Crisis. That bear would run on until late October 1957, but a bull market began well before the disease was in check. A decade later, stocks entered a bear market about two months after the 1968 pandemic, whose death toll was similar to 1957 – 1958, broke out. But that bear came from the combination of an inverted yield curve and euphoria after a nearly decade-long expansion, and it lasted until mid-1970, long after the pandemic faded.

The most striking example is the deadliest outbreak in modern history: The 1918 – 1920 Spanish flu outbreak. Record-keeping then wasn’t what it is now, but researchers estimate at least half a billion were infected, with 100 million deaths—then about 6% of the global population.[iv] It was deadliest to young, otherwise healthy adults, and it came on the heels of a world war that decimated much of Europe. Stock market data before 1926 aren’t terribly reliable, but historical Dow Jones Industrial Average data suggest US stocks rose double digits in 1918 and 1919. If markets could overcome something so deadly, it seems fair to say they can be similarly resilient after a century of medical innovations that have drastically curbed contagion and death tolls. Breaking news of a fast-spreading illness may sway some stocks in the very near term, but the likelihood of a material, lasting downturn tied to one seems exceedingly low to us.


[i] Source: FactSet, as of 1/21/2020. S&P 500 Total Return Index, 5/8/2009 – 5/15/2009 and 6/12/2009 – 7/10/2009.

[ii] Ibid. S&P 500 Total Return Index, 11/27/2002 – 3/11/2003.

[iii] Ibid. S&P 500 Total Return Index, 12/31/2002 – 12/31/2003.

[iv] John M. Barry, The Great Influenza, Viking, 2004. 


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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.