1918 Spanish Flu and Other Questions

Susan Jung |


Crazy markets continue with market volatility still at high levels. Oil prices have moved dramatically, and equity markets continue their up-and-down movements. You can expect this to continue for the foreseeable future. Try not to be lulled into a false sense of relief if you see the market stable for a few days or a couple weeks. Volatility still lives.

A friend of mine (a senior writer at CNBC), Jeff Cox, posted an interesting article on CNBC.com.  I will let you read the full article yourself (for informational purposes), but the headline alone is interesting: 

“After a crazy 12 months, the S&P 500 is about back to where it started”

In other words, it's important to put in perspective current market volatility and recognize that, as painful as the recent downturn has been, the market has essentially been flat for the last 12 months.   

1918 Economic Impact

Since you have no doubt been reading about the Spanish flu pandemic that occurred in 1918, I thought it might be helpful to provide to you a link to an academic article that outlines the economic damage caused by the influenza virus outbreak from 100 years ago. It's a pretty technical paper, but this is the type of reading that we do on a regular basis as we analyze markets and develop investment strategy. 

A basic summary of the article is provided by the authors stating:

Pandemics Depress the Economy, Public Health Interventions Do Not

We find that cities that intervened earlier and more aggressively do not 
perform worse and, if anything, grow faster after the pandemic is over. 
Our findings thus indicate that NPIs not only lower mortality; they may 
also mitigate the adverse economic consequences of a pandemic.

The abstract is located here (for informational purposes).
https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=3561560.  If you would like, the entire 49-page paper is available as well for download.

While current conditions are different, the authors are stating that the intermediate and long-term economic impact in 1918 was manageable (beyond the short-term pain).

This Week’s Video Update

In this week's video update, I answer the following questions:

  • What happened to the economy after the 1917 pandemic?
  • How do you develop investment strategy and invest in a crazy market?
  • What’s the difference between fundamental and momentum investment strategy?
  • Do deficits really matter?
  • What will the unemployment rate likely be this year?
  • Any questions, please let us know.


We will continue to provide you information that we believe is helpful to understanding current market conditions, economic challenges, and items that impact how we develop portfolio strategy. Our goal is to keep you informed as much as possible. My apologies if the amount of information seems excessive. In times like these, I like to do my best to keep you plugged into our thinking.

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