When Hitler and his Nazis invaded France in May 1940, the Dow Jones Average fell 23% over eight days. After the Japanese surprise attack on Pearl Harbor on Sunday, Dec. 7, 1941, the Dow fell 3% on Monday and another 3% on Tuesday.
During World War I, the stock market fell over 33% from July to December 1917. However, it started to recover even in the face of the deadly Spanish Flu epidemic of 1918 that claimed up to 50 million lives worldwide. The stock market almost doubled from its low in 1917 to the end of 1918.
The US stock market has fallen over 34% in response to the coronavirus outbreak of 2020 so far.
In all cases during the outbreak of war and contagion, investors panic and unload stocks at any price. The stock market often serves as a thermometer for our national mood and the barometer of collective fear or hope.
These dramatic drops in stock prices usually mean one thing: smart investors are going to snap up stocks at bargain basement prices and make a fortune when the contagion passes.
During World War II, the Dow plummeted as people reacted with fear and panic that their investments were going to be wiped out entirely. People who were close to retirement had good reason to panic. They had no idea if A) World War II would end in victory or defeat for the Allies over the Axis Countries or B) the War would end in one year, five years, 10 years or ever.
When humans are confronted with the unknown, especially during war or surprise outbreaks of contagion, their “flee or fight” mechanism gets triggered to the highest order. Most flee, especially when it comes to their money. Take what you can and leave the rest is the motto in times of panic.
An ancient Persian story tells of a king who wanted something to inscribe in his ring that would make him happy whenever confronted with sadness. The inscription read “This too shall pass.”
The Peloponnesian War passed. World War I and the ensuing Spanish flu pandemic of 1918 passed. The Great Depression and World War II passed. Two atomic bombs were dropped and that passed. Brutal murderous dictators such as Hitler, Stalin and Mao, who collectively were responsible for the deaths of hundreds of millions of people during World War II and in post-war purges, eventually and thankfully passed from this temporal world as well.
Somehow, our ancestors made it through them all. All of the previously-mentioned natural and man-made catastrophes dwarf anything we have seen or will see in our lifetime. Hopefully.
The greatest fear we have today is the fear of the unknown. Once the incidence of new cases starts to flatten out, or stop — as they say has happened in China — or a vaccine is developed, the current panic should subside as it has in past financial, public policy and personal panics.
Sadly, the most troubling aspect of the coronavirus outbreak is the unknown veracity of reporting agencies. Either the World Health Organization has been completed bamboozled by Chinese officials or CDC computer models have vastly over-estimated possible deaths in the US from COVID-19.
China has “officially” reported 3,274 deaths out of more than 82,000 reported cases. 73,000 have recovered with 5,120 active cases still under treatment. Even if all of those 5,120 active cases end in death, China would report less than 10,000 deaths due to the “most deadly virus since the Spanish flu,” that claimed 50 million lives a century ago.
Social media and cable news have distributed CDC-generated estimates that 1 million Americans will die because of COVID-19. Some claim 156,000 North Carolinians alone will succumb to coronavirus.
Zero deaths have been attributed to the virus in North Carolina to date.
We are about to embark into unprecedented territory in terms of sweeping public policy to address the COVID-19 crisis. Policy-makers should consider every possible angle before committing to solutions that may be irreversible for years to come.