Have you seen the news lately? I’m sure you haven’t been able to miss all the talk about the coronavirus or the market reaction to it. More than most anything, the financial markets hate uncertainty and the virus is providing plenty of it this week. So, let’s talk about it for a bit.

Why has the market reacted so strongly?

Markets react to cause and effect because markets are people. We think and plan and strategize and create because we were created for it. We have the ability to look forward and think about how possible outcomes to different situations may affect us and plan accordingly. We look at the weather on our phones so that we know how to dress tomorrow. We save up an emergency fund because we know unforeseen events can happen.

Financial markets do the same thing because financial markets are made up of all of us. Once a virus is known to be spreading, steps will be taken by everyone from families to healthcare workers to governments to isolate it and prevent its spread. As movement decreases, I may not be able to travel as I planned. I might not be able to ship goods that I’ve created to my customers. If they don’t receive the goods they’ve ordered, I won’t be paid. If I’m not paid, I may not be able to meet obligations to my suppliers or lenders. I may not have access to capital my business needs because my sales have dropped. Multiply this scenario across the worldwide marketplace and an up-to-the-minute news cycle fueled by social media and you can see how markets can drop so quickly.

We’ve been here before…

The coronavirus is just the latest reason for the market to react. Remember the SARS virus from February of 2003? The Dow had 8 days of 100 point drops to close February at 7,806.98. 

How about the more recent EBOLA virus? The Dow declined a total of 5.8% to close February 2014 at 16,321.71. Zika virus? The Dow was down 12.9% to close at 16,639.97. 

It’s true, the market is down close to 15% for the last 7 trading days, but where do you think it will be in 6 months? 5 Years? 10 Years? The point is that we’ve been here before and will be here again in the future, but the market has been resilient when given time to adjust to the uncertainty of the moment.

And we’ll be here again…

We may experience more declines in the market in the days and weeks ahead. It’s even probable as more cases of coronavirus are discovered and reported. It will feel uncomfortable and hurt to look at our February investment statements. Because we’re human and want to proactively protect ourselves from discomfort, we’ll want to make changes that have long-term effects because of short-term events. 

However, the best thing we can do is to control what we can control. How’s the emergency fund? What are our income needs over the next year or two? Over the next 2 to 5 years? Over the next 30? How much risk can we take in our portfolio and sleep at night? Are we getting good sleep and eating well? Are we washing our hands regularly and doing what we can to prevent the spread of germs?

The best thing we can do is continue to think long-term about our plans, work towards becoming who we’re called to be, and wash our hands. In other words, control what we can control.