How COVID19 Changed Our World

Comments Off on How COVID19 Changed Our World
How COVID19 Changed Our World

When Americans look back on January 2020, they will see it as an inflection point that changed our world, much like December 7, 1941, or September 11, 2001.  Through no fault of our own, our lives were suddenly disrupted, our assumptions changed, and our options redefined.

As the virus swept across the globe, businesses were closed, people were told to virtual quarantine themselves, and the death toll mounted.  Beginning on February 20, “panic selling” drove markets down across-the-board.  Strong companies, as well as weak ones, saw their stock prices cut 25-to-50%.  Globally, equity markets lost over $25 trillion.

The VIX fear index hit an all-time record high of nearly 87.  Meanwhile, investment in money market funds reached a record high approaching 4 trillion dollars; that’s was 25% higher than just one year earlier.

 On March 22, the Trends team held a video “Town Hall” in which we addressed a broad set of fears related to the pandemic itself, the economy, and its investment implications. 

What was the message?

Too many people fear that business will need many years to recover.  However, the rational answer for investors is obviously to follow Warren Buffett’s famous advice, “Be fearful when others are greedy and be greedy when others are fearful.”

In fact, history implies that this panic reaction makes little sense.  For reference, consider just two panics of comparable magnitude to the COVID19 panic: the 31.5% decline associated with the 1987 Stock Market Crash and the 39.5% decline associated with the collapse of Lehman Brothers in 2008.  One year after the 1987 Crash, the S&P500 was up 27.9% and it rose an average of 18.9% a year for the 10 years following the panic.  One year after the collapse of Lehman Brothers, the S&P500 was up 48.8% and it rose an average of 15.8% a year for the 10 years following that panic.  In short, those who responded rationally to the market won big.  Those who panicked and stayed on the sidelines, lost.

So, why has the COVID19 crisis been so uniquely disruptive and why will its indirect impact be felt on a scale not seen since the Black Plague of the 14th century?

The difference lies in the unique geopolitical, economic, and technological factors which have led to an unprecedented response.

Prior to the discovery of COVID19, the U...

To continue reading, become a paid subscriber for full access.
Already a Trends Magazine subscriber? Login for full access now.

Subscribe for as low as $195/year

  • Get 12 months of Trends that will impact your business and your life
  • Gain access to the entire Trends Research Library
  • Optional Trends monthly CDs in addition to your On-Line access
  • Receive our exclusive "Trends Investor Forecast 2015" as a free online gift
  • If you do not like what you see, you can cancel anytime and receive a 100% full refund