By now, everyone is overwhelmed with coronavirus information. With the airwaves, TV and internet providing round the clock coverage of the pandemic, we can offer little in the way of new insights on the virus and its rapid spread in the U.S. and globally. Many of us have experienced various types of financial crises during our lives. We have seen presidential assassinations, wars and terror attacks. And we have even encountered other disease epidemics such as MERS, SARS and the Swine flu. Not since the Spanish flu in 1918 has fear of the spread of disease been so great. Extraordinary measures such as mass quarantines of countries or localities, forced school and restaurant closings, mandated teleworking and telelearning, the postponements or cancellation of events and large gatherings are being implemented in an effort to mitigate the spread of the virus.
The newest coronavirus (COVID-19) came to the world's attention in mid-January when the Chinese government began quarantining the epicenter in the province of Wuhan. Travel restrictions were put in place and factories shut down, in an effort to contain the spread of the virus. With infections contained to China and a death rate (approximately 3%, but subject to change since tests are not widely available) far below that of other coronavirus outbreaks, such as SARS (9.5%) and MERS (35%), the U.S. markets took these developments in stride and continued their march to all-time highs. Even as the number of infections reached 80,000 people and spread to other countries, U.S. equities continued higher, pushed up by strong economic activity and a newly reached Phase 1 trade deal with China.
Is the trend of increasing state legalization of cannabis, commonly known as marijuana, making it the investment flavor of the day, or something that should be part of an investment portfolio? There are many issues surrounding legalization of recreational and medical use of marijuana. Pot is still federally illegal to grow and transport across state lines, which makes traditional banking and financial services more difficult until these rules are eased; and the long-term health impact of habitual use is unknown. These basic issues have yet to be addressed.
At the end of September, most major stock market indexes stood at all-time highs. The economy was booming and interest rates, while rising, still remained low by historical standards. Although the economic fundamentals have remained largely unchanged, merely one-month later much has changed in the stock market. The S&P 500 has dropped by nearly 10% this month and, after leading the market higher for the past two years, Nasdaq stocks have taken a beating in October, closing down nearly 15% this month. This performance is the worst of any month since the financial crisis began ten-years ago.