A Potential Coronavirus "Second Wave" in the Fall Would Slam Stocks Again

The turmoil in the markets may make an unwelcome encore appearance in the fall. Yes, there's a chance that cases of the coronavirus will again start to rise as outside temperatures drop.

While there's no way of knowing now if this will happen for sure, viral respiratory diseases like the coronavirus, such as the flu, tend to follow seasonal patterns.

That's why "flu season" is synonymous with fall and winter.

The good news here is that if true, the arrival of spring in the northern hemisphere could help arrest the further spread of COVID-19.

That would help limit the damage to the economy and the stock market in the near term.

But it also means a resurgence of the coronavirus is likely to strike in the latter months of the year. And that would trigger another stock market crash.

We've already seen substantial economic damage, starting with the disruption to the global supply chain in China. The travel industry is getting slammed. And as more consumers - and workers - stay home, the impact will affect nearly every U.S. business.

That's why stocks are getting hammered.

Even if the coronavirus subsides over the summer, the economic damage will have the economy on its heels for much of 2020 - if it doesn't tip it into a full-blown recession.

Now imagine the impact of a second round of the coronavirus on the economy and the markets.

This doesn't mean you should panic. But investors need to bear in mind that this crisis could play out in stages over an extended period. You can't let down your guard.

So how likely is it that we'll see a return of the coronavirus in the fall?

Here's what the experts are saying...

Why the Coronavirus Could Turn Out to Be Seasonal

The Centers for Disease Control is among those expecting the coronavirus to slow with the arrival of warmer weather.

"Other viral respiratory diseases are seasonal, including influenza and therefore in many viral respiratory diseases we do see a decrease in disease in spring and summer," Dr. Nancy Messonnier, director of the CDC's National Center for Immunization and Respiratory Diseases, said on a conference call on Feb. 25. "And so we can certainly be optimistic that this disease will follow suit."

Multiple factors play into this seasonality:

  • Cold air causes irritation in the nasal passages, making people more susceptible to viral infections.
  • People spend more time indoors in close proximity in the colder months.
  • Respiratory viruses tend to spread in droplets in the air. Cold and dry air allows a virus to survive longer, giving it a better chance of infecting another victim.

This doesn't mean people can't get infected in warmer weather, just that it's much less likely.

Paul Hunter, an infectious disease expert at Britain's University of East Anglia, echoes the CDC hope that the coronavirus will decline during the summer months.

"Whether it comes back again is a moot question," Hunter told Reuters. "It would not surprise me if it largely disappeared in summer only to reappear again in the winter."

Two coronaviruses closely related to COVID-19 - severe acute respiratory syndrome (SARS) and Middle-Eastern respiratory syndrome (MERS) - are known to spread significantly faster in colder weather. One study found that SARS spread 18 times faster in cold weather than in warmer weather.

A rebound of a pandemic virus would not be unprecedented.

One of the worst respiratory virus pandemics in history, the Spanish flu of 1918, actually hit in three distinct waves.

The first wave, which hit the late winter of 1918, was not nearly as severe as the second wave, which hit in the fall of that year. A third wave struck in the winter and spring of 1919.

By the time it ended, the Spanish flu had infected a third of the world's population, killed more than 50 million people, and sliced 5% from the global economy.

That doesn't mean the coronavirus will get that bad; we have far better ways of fighting such diseases today.

But it doesn't take much to stoke public fears that affect consumer behavior - and the markets.

So here's what investors can do to cope with the market gyrations both now and down the road should the coronavirus strike again in the fall...

How to Prevail in a Coronavirus Market

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The markets are down due to fears of the economic impact of the coronavirus. But the extreme price swings are driven by the kind of uncertainty I've outlined here. That means investors need to expect and prepare for more such volatility, possibly for the rest of the year.

Money Morning Chief Investment Strategist Keith Fitz-Gerald says investors need to resist their worst instincts as the markets gyrate.

"The coronavirus situation is going to be with us for a while, which is why you want to take a longer-term perspective rather than fall prey to the short-term narrative dominating headlines," he said. "Many short-term traders are getting their you-know-whats handed to them on a silver platter right now because they cannot tell whether the markets are coming or going."

Instead of reacting to what's happening, Fitz-Gerald advises looking for quality companies and resisting the urge to buy any stock that's suffered a large percentage loss.

"Amateurs are trying to buy stocks just because they're down, not realizing that they can go down further," he said. "But savvy investors are buying stocks that go down the least and roar back the fastest. You want to buy the world's best companies because they're the ones with (1) a clear path to profits and (2) the ability to protect margins in the face of challenging economic conditions."

Doing your research and buying quality will pay off when the coronavirus crisis ends - whenever that happens to be.

As for selling, Fitz-Gerald also advises hanging on to the quality stocks you own despite some paper losses in the short term. Selling out of fear could be a costly mistake.

"At some point, the volatility will start to decline, which is why you want to think about the choices you make in terms of playing the broader upside that still exists despite overwhelmingly negative headlines," he explained. "The average investor doesn't understand half of what they're missing if they sell out now simply because they're scared or uncertain."

Above all, Fitz-Gerald says you shouldn't lose sight of the money that can be made by keeping your head while those about you are losing theirs.

"The profit potential is simply unprecedented, especially if you can pick up shares when the rest of the market is scared silly," he said.

Action to Take: Recognize that the coronavirus situation is fluid, and prepare for the possibility that the outbreak may subside in the summer only to reappear in the fall. Resist getting caught up in the day-to-day volatility of the markets. Instead, focus on seeking out and holding quality stocks.

Your Financial Future Is at Stake (Are You Prepared?)

If you're like most Americans, you've felt a sense of market turmoil ahead. We could be in for another white-knuckle ride... a "Great Reckoning," if you will.

The vast majority of folks don't see this coming, and those few who do are not preparing properly... nor profitably.

So ask yourself, right now: Are you where you want to be financially?

If the answer is yes, that's great.

If the answer is no, then understand that you are not alone - and you need to click here now...

Follow me on Twitter @DavidGZeiler and Money Morning on Twitter and Facebook.

About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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