What History Can Tell Us About the Post-COVID-19 Investing Market

David L. Johanson |

There’s no two ways about it – the COVID-19 pandemic has been a historic moment around the world.  From the financial markets to our daily lives, many of the norms we took for granted back at the beginning of the year have been shaken up.  Given the unprecedented nature of this disease’s impact on society, it is difficult to predict what a post-COVID-19 investing market will look like.

The financial effects of a major pandemic are not entirely without precedent.  In fact, just over 100 years ago, the US and the world struggled to contain a pandemic of H1N1 influenza (sometimes known as the Spanish Flu).  We can learn a few lessons from that pandemic as well, so perhaps we as a society are more prepared.

Recoveries Take Time

First and foremost, the 1918 flu pandemic should teach investors that the dangers of the disease are not gone until long after the coast has seemingly cleared.  That’s because the 1918 flu pandemic saw three major spikes in cases over the course of its multi-year progression.  Each of these spikes caused the financial markets to take a hit and then recover to higher levels.

Knowing this, don’t start reinvesting on the belief that things will blow over sooner than later.  Our recommendation, as always, is to stay patient.  Maintain a balanced portfolio for your goals and buy on the dips. 

Recession’s Develop

We did incur a very speedy recession early in the year, but soon came out of it.  Even though the Federal Reserve and Washington DC deadened some of the impact of this recession, we have parts of our service economy that have been knocked around.  We need to have more help for those most affected.

The Market May Not Reflect the Economy

When considering your long-term investments, it is important to remember that the stock market and the economy are not one and the same.  The stock market will show signs of life before the average American family feels economically stable again (as was the case in the 1918 pandemic).  

Stock values rise for a variety of reasons.  Ideally, one of those reasons would be investor’s confidence in companies that things will get better.  Any long-term investments made during this period should be balanced between finding growth stocks that are benefiting and value stocks that have been out of favor for a time.

The Bottom Line

The impacts of the 1918 flu pandemic may not always be comparable to our experiences in the COVID-19 pandemic today, but the brief history lesson might provide a little more guidance and patience.