Coronavirus and an Already-Sick Economy

The World Health Organization has declared the outbreak of the coronavirus a global emergency after cases were discovered in more than 25 countries. In an interview with CNN, CDC Director Dr. Robert Redfield shared a less-than-positive outlook on the virus here in the U.S.

"We don't know a lot about this virus," Redfield said. "This virus is probably with us beyond this season, beyond this year, and I think eventually the virus will find a foothold and we will get community-based transmission.” He went on to say that as of right now, the CDC is in aggressive containment mode.

The public and the equity markets remain volatile on news of the spread of the virus. A warehouse in Hong Kong was robbed of 25,000 face masks as the public seemingly remains haunted by the 2003 SARS outbreak that infected more than 8,000 people. Last week the S&P had its worst week of the year after reports of major U.S. airlines announcing widespread cancellations of flights to China. Just as quickly it turned around and set new highs on news that the virus was well contained.

In recent history, when a disease or virus outbreak occurs, it is immediately analyzed and quickly neutralized and life and investing go on without effect. The SARS outbreak in 2003 came out of China and killed 774 people but was largely contained and did not have a massive global impact. In fact, the S&P rose by more than 20% that year. The coronavirus, however, is spreading rapidly and has now infected over 75,000 people and caused more than 2,000 fatalities, causing many to wonder if this virus will have a much more significant impact on global health and global economies.

In 2019, the U.S. economy entered its longest growth expansion in history. Unfortunately, many analysts and investors fear that an economy this late in its growth cycle can't handle a large outside shock. Recessions usually occur about every eight years and reset and recalibrate a bloated market. According to the calendar and thanks to constant central bank intervention that continues to artificially build our economic growth, the U.S. is overdue for a recession. The coronavirus could easily be the final test our markets aren’t healthy enough to bear.

Gold and silver are safe havens in times like these. With an inverse relationship to the market, they act as a hedge, turning what would be a massive loss of wealth in a recession or economic breakdown, to a simple transfer of wealth across an individual portfolio. In our experience, we’ve seen allocations as small as 5% protect entire retirement portfolios. Call us today to find out more about what gold and silver can do for you.