I sensed a definite uptick in the anxiety level today across the board here in the US. With outbreaks in Manhattan, I have decided to stay away and work from home for the foreseeable future. It’s just riskier for yourself and others to commute to work in such a crowded place. I did an exercise the other day to see how many high touch surfaces I myself touch just to get into the office such as buttons, door handles and poles on public transport. I counted 10 before I even sat at my desk. If someone down the street in Manhattan has Coronavirus, then there exists likelihood someone else with it has touched a handle, knob or button near me.

In contrast, when I stayed in yesterday working from home, I counted myself touching 10 high touch surfaces in an entire day and in areas where there are many fewer people touching those things. It doesn’t mean I can’t catch it but it’s part of my contribution to dampen the spread. Lessening the impact is going to be key here and we can learn a lot about what to prioritize through what other countries have done recently as well as the last great pandemic in 1918.

Notable Reactions to the Spanish Flu Pandemic

The research that I did for my post on the similarities between the 1918 Spanish flu and how the Coronavirus is playing out now, is becoming ever more relevant as developments unfold. In that post, I talked about how people avoided crowds and the virus spread widely and rapidly. Now that people are taking the virus seriously, a little too seriously in my opinion, it’s may be worth a short recap of what we may see next, the advantages we have that we didn’t have 101 years ago, and why you shouldn’t be worried about the markets.

When we look back on the 1919 Spanish flu and how it spread, it worth remembering that:

• The pandemic spread far and wide. From arctic tribes to remote Polynesian islands. Humans find a way to contact each other and we should expect this virus to do the same, even if we shelter in place. This is one reason I am a bit concerned that China is attempting to go back to business as there is a risk of a reinfection through the virus outside of China coming back in.

• The government also downplayed it and then covered it up. Due to WWI, reports of soldiers getting sick were censored but it was the sickness of Alfonso XIII that gave the flu it’s name but that was only because Spain was not involved in the war and had a free press. The stories emanated from Spain of the virus, giving the flu it’s name even though it likely didn’t originate there.

• Panic ensued and many communities attempted to shut schools and public events. Court cases were held outside so people could not be confined indoors, schools were shut and some towns required people to wear masks. Much of the panic we see today was emulated but probably less coordinated in 1918.

Source: New York Times

• There were waves. Initial waves were among the troops in Europe but as many of them returned after the war ended in 1918 they brought with them a virulent strain which killed 195,000 people in October alone in the US, about a third of the estimated 675,000 that died due to the Spanish flu in total in the US. There has to be caution in the getting back to work so as to ensure this doesn’t happen.

• Hospitals and funeral homes were overwhelmed. We are already seeing evidence of this in Italy, where today actor Luca Franzese posted a video on social media explaining how he was quarantined with his dead sister and could not get anyone to retrieve her body for funeral preparation. Eventually, due to the viral video a local politician contacted him and her body was taken to be buried but this is a shocking example of what could be to come if hospital and funeral services are overwhelmed. There are also sporadic reports from doctors and nurses that some hospitals are overwhelmed and they are having to make war time like decisions between who lives and dies. One picture going viral is of an exhausted Italian nurse on Twitter collapsing after a 10 hour shift.

Source: Twitter

However, there are big differences that give us hope for optimism and also can explain why the stock market is down by so much compared to the 10% downturn the market took during all of 1918.Source: Seeking Alpha

As opposed to the rapid descent we have seen since February.

Source: Google

The Differences Between Then and Now

• Information travels vastly faster. In a way, it’s a good thing that people are alarmed on social media and the news. In 1918, information could be more tightly controlled and governments at war wanted to keep the public docile to continue support for the war. Now, almost anyone can share a picture or video and display what is happening to the world. The speed with which sports leagues and large events have been cancelled is amazing compared to 100 years ago.
• We have a better understanding of viruses. We also have a better educated public, despite all the naysayers and pessimists. People understand the basics of washing your hands, not crowding together and voiding touching your face. The public is very receptive to the latest information from doctors and scientists, even if they tell us that they don’t have a firm grasp on some characteristics yet.
• Markets and the world are much more integrated. This is one reason markets have reacted so severely to the pandemic. Not only does much of the revenue of the S&P 500 depend on international trade for its sales but many of the largest companies like Apple have vastly widespread and international supply chains. The cheap labor of China has kept inflation and costs low for the past 20 years in the US but the dependence on that country for much of the goods Americans consumes shows the downside of being so dependent on one place.

Source: Market Watch

These key differences give us reason for optimism. On the medical side, social distancing and improved hygiene can hopefully help to slow the spread and more importantly, shield those most vulnerable such as the elderly. This would keep our health systems from being overwhelmed, flattening the curve as per the below is becoming a common phrase.

Source: New York Times

On the markets side, investors are aware of these advantages, which is why it is expected that this will be a temporary downturn. Markets are still falling though because there is still a lot of uncertainty in terms of how long and how severe this will be. Once there is some clarity and things start to ease in terms of these restrictions, whether it is 2 months or 9 months from now, it will happen. At that time markets will likely recover and begin their slow climb upwards again.

Don’t Worry About the Markets

I have been getting many requests with the question, “what should I be buying?” This is tough to say if I don’t know your goals for the money or your appetite for risk. New investments always have to be made in the context of your current investments.

I can say however, that with the continued uncertainty, the market will likely continue on a lurch downwards. No one knows exactly when it will stop but the best strategy if you have some cash to invest would be to dollar cost average, investing a bit each month, even if it’s falling, bringing your average share cost down. Just keep investing and don’t pay attention to the financial news.

What I would say to people is that rather than worry about stocking toilet paper or worrying about your 401k, take this time to reach out to your elderly family members. We could be in a for a rough period where many of our older loves ones could succumb to Covid-19. Those with preexisting conditions and who are elderly are most at risk. I am especially worried for my mother who is being treated for cancer and has to continually go to the hospital for treatment. Out of fear of spreading it to her, I have to use an abundance of caution before I were to even think about visiting her, even in her situation.

Based on the mortality rates of those infected with the virus below, chances are that if it doesn’t affect our family we will know someone who is affected by it if rates of infection for the whole population reach 40% to 70% like some epidemiologists have described.

Source: Quartz

So turn off the news, especially the financial news and take this time to reach out to a loved one just in case. Down the road you could look back and be more proud that you did rather than if you made money buying the dip in the market.

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