Monday, fear over the Coronavirus finally gripped investors, as both the Dow Jones Industrial Average and the S&P 500 index fell over 3% - the largest daily declines in two years. These drops wiped out all the gains for the year.

Frankly, it's amazing to us that the market had been so resilient! Maybe it's because recent history with stocks and viruses is that markets overreact leading to significant buying opportunities along the way. Over a 38-day trading period during the height of the SARS virus back in 2003, the S&P 500 index fell by 12.8%. During the Zika virus, which occurred at the end of 2015 and into 2016 the market fell by 12.9%. There are other examples, but they all passed, and the market recovered and hit new highs.



Will this happen again? Our view is that it is highly probable.

We aren't trying to be immunologists, and that may make our points moot, but there aren't that many immunologists in the world and the World Health Organization says this is not yet a true pandemic. We're just economists, but looking at the data, and having perspective is always important.

This whole thing is a human tragedy and we would never take human life and suffering lightly. And looking at data can make people appear cold, when in reality all they are trying to do is understand the situation. There are currently 80,088 confirmed cases and 2,699 deaths from the coronavirus COVID-19 outbreak as of Monday. This is a big number and is still growing, but the pace of growth looks to be slowing.

Much of the pessimism surrounding the virus focuses on the Chinese under-counting the number of infected to save face. However, it's important to note that a shortage of specialized test kits has caused health officials in many countries to rely on observable symptoms for diagnoses, and because coronavirus mimics the flu and pneumonia in its early stages, it's also possible that authorities may be over-counting as well.

Instead of looking at it from a total confirmed case perspective, we think the number of total active cases provides a better look into what is happening. This measure takes total confirmed cases and subtracts deaths and recoveries. This gives the total amount of people who have the potential to spread the virus further.