If you have any money invested in the stock market, you might be nervously paying attention to the wild swings the market has experienced in the past two weeks. After reaching an all-time high on Feb. 12, stocks fell roughly 25% in the weeks that followed. There was a record one-day-gain (jumping 5%) on March 2, only to have that record gain followed by a series of record losses as the market recorded its quickest 30% drop in history. While most investors may not fully understand the causes of the dramatic swings in the market, many understand that it has something to do with a phenomenon that has been dominating global news for the better part of 2020: the coronavirus.

Since making its way into international headlines in January 2020, the coronavirus, which leads to the COVID-19 disease, has infected more than 300,000 people worldwide, and its impact is felt far beyond those who have contracted the virus.

Global travel has plummeted, retail stores have emptied, and international supply chains have been greatly impacted by precautions trade restrictions so nations can attempt to contain the virus and lessen its impact. When considering the fact that 1 in 10 jobs are globally supported by tourism, it’s not hard to see why the stock market has reacted so dramatically to news and updates related to the spread of COVID-19 around the world.

While the news about the actual global health impact of the coronavirus is certainly top of mind for many Americans, many adults who have significant amounts of money invested (whether in a personal brokerage account, IRA, a 401(k) plan or other retirement accounts) are also concerned about the impact of the coronavirus on their finances.

This blog will shed some light and provide context on the impact this outbreak has had on the global economy, predictions on possible scenarios regarding its spread, what this could mean for your investments, and what actionable steps you can make going forward.

What does the coronavirus mean for retirement accounts and investments?

So, you already know that the coronavirus is a global concern. Later on, you will learn several different scenarios that could play out in the next 12 to 18 months on how the epidemic could end. But the question that you and millions of other American employees are asking themselves is How will all of this impact my investments and money?

As of March 23, 2020, the stock market as a whole was down about 36% from its record high, meaning Americans have collectively lost over $10.0 trillion in wealth, which is certainly a tremendous concern. However, market corrections of 10% to 20% are relatively common. In fact, the market dropped roughly 12% in December 2018, before quickly rebounding and rallying through much of 2019 before the onset of coronavirus fears. While no one can truly predict market fluctuations, be wary of anyone who claims they can. It is reasonable to expect that the stock market will continue to drop or fluctuate, at least for the next few months, while new cases of COVID-19 continue to rise around the world, along with the impact of travel reductions is felt. With this in mind, for anyone who does not need to access their investments anytime in the near future (like anyone who is not planning to retire in the next two years), be cautiously optimistic about your investments and retirement accounts.

One of the best investment strategies, especially within workplace retirement accounts, is to purchase high quality, low-cost index funds that track market averages, and holding them for the long-term to build wealth slowly. There will always be market fluctuations. In the last 30 years alone, Americans have experienced the “Black Monday” market crash of 1987, the collapse of the dot-com bubble in the early 2000s, and the Great Recession of 2008, which each caused global markets to drop by more than 50%. Yet, the stock market today, even after the recent 26% drop, is nearly 1,000% higher than it was thirty years ago. The past few decades have showcased that in a majority of cases, passive investment management (“buy and hold” strategy) supersedes active management (buying and selling stocks and investments often). One can conclude that buying high-quality, market tracking index funds and holding them for years could yield more profits compared to those who attempt to “time the market” by continuously buying and selling investments when they believe the momentum of the market is about to change.

For investors with a relatively long time horizon (15, 20, or even 25+ years from retirement), market drops can represent intriguing investment opportunities to purchase index funds at cheaper-than-normal prices. A strategy for those who are hesitant to invest more in uncertain economic times is dollar-cost averaging.

Dollar-cost averaging is a strategy where investors (like you), choose a set amount of money to fund your investment(s) with, each month. This means that investors will purchase more shares or investments when the value or price of that investment is cheaper, and purchase less shares or investments when the value or price of that investment is more expensive. This offsets the timing risk, or concern of entering the market at the wrong time.

In this example, with dollar-cost averaging, the investor saw a profit in their investments after the third month, even after a significant drop in the market price of their investment.

Some context: What is the coronavirus?

You’ve probably heard and seen the words “coronavirus” or “COVID-19” dozens of times across news outlets and on social media. COVID-19 has dominated international headlines as citizens all over the world watch nervously as updates on the total number of people with the disease continues to rise. The earliest reports of individuals affected by the coronavirus came out of Wuhan, China in December 2019. Similar to the SARS outbreak of 2003, the virus is thought to be zoonotic, meaning it spread from a non-human animal to humans. Many affected individuals develop pneumonia, and suffer other symptoms including fever, coughing, and difficulty breathing. Partly due to the highly contagious nature of the coronavirus, its newness to the medical community, and the popularity of international tourism, COVID-19 quickly spread to well over 300,000 people in over 150 countries around the world, killing over 15,000 (to date, March 2020). On Jan. 30, 2020, the World Health Organization (WHO) declared the outbreak as a Public Health Emergency of International Concern. Some initial reports from China announced that the number of new cases have begun to plateau. Comparing that to the rest of the world, there has been a spike in international cases, especially in Italy, Iran, South Korea, and Japan, causing worldwide concern from international health workers, governments, and citizens. Finally, on March 11, 2020 the WHO officially labeled COVID-19 as a global pandemic.

The spread of COVID-19 in the U.S.

Initially, there were some mixed messages around the severity of the COVID-19 outbreak in the United States. The first reported case of the coronavirus in the U.S. occurred on January 21st, 2020. Beginning in early February 2020, the United States government required any American returning from the Hubei province of China, where Wuhan is located, to submit to a 14-day quarantine to ensure they were not infected with the virus. Additionally, non-citizens who had travelled to China in the preceding two weeks were prohibited from entering the country. While initial cases remained in the single digits through the end of January and the first week of February, more and more cases began to surface, and the first deaths related to the virus were reported in early March, the majority being residents from Washington state. In the first week of March, it was reported that over 200 Americans had contracted the coronavirus. On Feb. 26, the first reported case of the virus in America resulting from “community spread” (when an individual contracts the virus, and they had not travelled to an affected region and had no known contact with an affected person) was reported in California. That number has since climbed both on the west coast and on the east coast, with New York confronting their new rise in cases. The CDC offered several measures individuals could take to attempt to limit exposure to the virus. These include frequently washing hands (for at least 20 seconds), having hand sanitizer available, avoiding crowds whenever possible, and avoiding touching your face, eyes, or mouth. In some regions, such as Washington state, schools have opted to cancel classes to prevent further spread. Vice President Mike Pence, who is charged with leading the effort to combat the spread of the virus by President Donald Trump, announced in early March that a coronavirus test kit would be available to any American who is symptomatic, in an effort to diagnose, quarantine, and treat infected Americans quicker. By late-March, cases in the United States had jumped to over 30,000 with roughly 400 deaths, and in response hundreds of planned sporting events and other large gatherings were either cancelled, suspended, or agreed to carry on without spectators, such as the NCAA Basketball Tournament, commonly referred to as March Madness.

Impact of COVID-19 on the global economy (so far)

Because of the interconnected global economy in the 21st century, impacts of the coronavirus have been felt in almost every country. China is the world’s largest exporter of goods, manufacturing up to one-third of all consumer products sold everywhere. In an effort to curb the spread of the coronavirus, the Chinese government shut down hundreds of factories and quarantined thousands of employees, which slammed the breaks on the supply chain of thousands of retail products around the world. In the same vein, hundreds of millions of people around the world are choosing to stay home and refrain from activities such as traveling and shopping to combat their fears of contracting the virus. As a result, restaurants, car dealerships, and thousands of retail chains have reported significant drops in sales and consumer traffic in the past month.  For example, car sales in China dropped by 92% during the first half of February as consumers chose to stay away from showroom floors. These activities boost and drive the global economy with dollars spent in restaurants, purchasing products, and tourism.

With the addition of travel restrictions that many countries have enacted to slow down the spread of the virus, the travel industry has been massively impacted with the cancellation of thousands of flights worldwide. Millions of travelers are voluntarily opting to cancel or postpone pre-planned trips and vacations, especially to areas that have been hit the hardest, such as Italy, China, and Japan. In fact, flights departing from China to any other destination have fallen to about 46% of their volume, compared to this time last year.

When considering the fact that nearly 10% of all jobs, globally, are supported by international tourism, the impact felt in this industry one of the most severe in the overall global economy.

Scenario #1: Best-case scenario going forward

According to health experts, a best-case scenario, with regards to the spread of the coronavirus and the global economy as a whole, is that the virus will simply fade away by the summer months. Some medical experts are hopeful that the coronavirus will ultimately end due to the successful global efforts to contain the virus. The Chinese government has already allocated funding to test approximately 1.5 million citizens per week. While the United States has been criticized for its initial slow reaction in recognizing the potential severity of the disease, Congress recently passed an $8.5 billion spending package to combat the spread of the coronavirus within the U.S. borders. The United States will soon have the capacity to test up to 575,000 people, per week.

Additionally, as researchers continue to study the new coronavirus, there is hope among many that the virus will behave similarly to influenza (flu). While it is detected year-round in the United States, the flu viruses are most common during the fall and winter, and less prevalent in the summer because of its difficulty surviving when the temperature rises. Privately funded researchers, alongside the CDC, are also developing a vaccine that could be used to halt further spread of the virus.

In this “best case scenario,” newly reported infections would start to decline in number during the summer months, a vaccine would be offered to non-infected individuals, and the global banking tactics to help stimulate the economy would all curb much of the damage that has been done to international markets.

Scenario #2: Middle of the road scenario

New modeling from The Australian National University (ANU) has outlined several possible scenarios of how the coronavirus could impact the global economy moving forward. On a lower impact in severity, ANU estimates a global economic loss of $2.4 trillion, which in context, represents about 2% of all wealth in America. This model is based on the Hong Kong flu pandemic of 1968-1969, estimated to have killed roughly 1 million people. If this scenario were to come to fruition, investors could expect a tough road for the remainder of the 2020 year. A rise in diagnosed COVID-19 cases around the world, and the dramatic reduction in travel and retail spending could cause a mild global recession that could last at least through the end of the year. From an investment standpoint, this would mean that stocks could fall throughout 2020, though exactly how much no one can know.

However, this does not mean that investors should sell all of their investments, especially if the majority of these investments are in index funds, which track market averages, such as Vanguard’s VOO stock. Trying to time the market by selling before an investor believes markets will drop or buying before they believe markets will rise often actually reduces gains instead of increasing them, as no one can truly time the stock market, even Warren Buffett.

Scenario #3: Worst-case scenario going forward

In the worst-case scenario, on the higher end of the severity spectrum, The ANU estimated that the coronavirus could cost the global economy nearly $9 trillion. The modeling for this worst-case scenario was based on the Spanish Flu Pandemic of 1918-1919. The Spanish Flu came after the end of World War I where soldiers, returning to their home countries at a time when international travel was much less frequent, contracted the virus and carried it back home. This movement amplified the flu’s global impact. The Spanish Flu became one of the most devastating pandemics in human history in terms of casualties and economically.

With this in mind, the worst-case scenario includes an acceleration of patients diagnosed with COVID-19, internationally, partly due to national health organizations becoming overwhelmed with the spread of the coronavirus. One of the challenging aspects of this virus and its spread is the relatively mild nature of symptoms that many infected individuals report experiencing early on, such as a mild fever or cough. These aren’t extraordinarily different from seasonal cold symptoms that millions of Americans exhibit each year. In fact, a professor at Yale University who criticized the slow response by the United States government, estimated that as many as 100,000 Americans could be unknowingly infected at this moment, and facilitating the virus’ spread by continuing their day to day activities without interruption. Economically speaking, this scenario could be disastrous. If new cases continue to rise through 2020, and potentially well into 2021, global travel is estimated to be decimated, implying that 10% of global jobs are at risk of being reduced or eliminated until the threat of contracting the coronavirus is significantly decreased or eliminated. A global recession is highly likely to ensue, and recovery likely would not occur until after a vaccine was generated and supplied globally or the virus runs its course and fades away on its own, after a significant number of people are quarantined.


While the global spread of the coronavirus is certainly alarming for millions of Americans, and these fears have been reflected in recent volatile swings on Wall Street, investors should know that market fluctuations are common - even if the underlying cause is something as serious and concerning as coronavirus. As long as investors have a few years where they don’t need to access their money, and a majority of their investments are in high-quality, low-cost index funds that track the overall stock market, there is no need to change your retirement or investment strategy. Investors should consider continuing to invest over the next 12 to 24 months through dollar-cost averaging to acquire more index fund shares at reduced costs, with the knowledge that, more than likely, the coronavirus epidemic will eventually subside and the global economy will resume normality.

Novice investors who are nervous about entering the market at the wrong time should feel reassured knowing that, in the last 50 years, the stock market has never been lower than it was 15 years prior. Meaning, if you purchased an index fund at any time in the past 50 years, your investment was worth more 15 years from that point, assuming investments tracked market averages. For example, if you invested money in market-tracking index funds at the peak before the Great Recession of 2008, as long as you held your investments, they would currently be worth about twice what you paid for them.

While everyone should be vigilant and informed on the progression of the coronavirus, investors should be cautioned about selling all of their investments for fear of a downward spiral, as this tactic often backfires. Instead, using a dollar-cost investing strategy for the next couple of years is an intelligent tactic to help you continue to invest while mitigating the risk of a major market drop.

The information presented here is for informational and educational purposes only. This is not investment advice nor is it intended to be. For investment or financial advice, reach out to a professional such as a financial advisor, tax consultant, or other professional.