EPIDEMIC OF THE CENTURY THESE LESSONS MAY PULL INVESTORS OUT OF THE COLLAPSE CAUSED BY REPORTING SPANISH FLU

Posted 13 July, 2020

  • Spanish flu killed up to 100 million people
  • Recovery after the Spanish flu was very differentiated
  • Protective dividends are quickly restored

Nobody knows what the future will look like after the global pandemic of the crown and how many lives the virus will still cost, but looking back will help you better assess the danger in order to prepare your portfolio for the worst.
 

The worst pandemic in world history

The First World War, which lasted from 1914 to 1918, claimed the lives of 17 million people around the world. Spanish flu, which raged between 1918 and 1920, is estimated to have killed 20 to 100 million people. This comparison quickly shows that the Spanish flu is not in vain called the most terrible plague ever to land.

With 100 million deaths, the flu has left far more victims than any other pandemic. The extremely aggressive virus caused an overreaction in the patients immune system, so that the immune system was directed against their own body and thus seriously damaged lung function. Unlike the course of the disease with COVID-19 infection, the Spanish flu has been strengthened by the strong immune system or the strong immune system of the respective patient. It also explains why so many young people have become victims of the Spanish flu.
 

Fear of the second corona wave

The fact that the current COVID-19 pandemic is now probably in the second wave is following the same path as the Spanish flu after the end of the First World War, despite all the fears and concerns, it is currently unlikely. “This will not be exactly the same situation as in 1918. [...] People are also becoming much older today, ”said influenza expert Silke Burda of the Robert Koch Institute in a 2018 BR article. In addition, living conditions from more than 100 years ago cannot be compared with today. For example, during the Spanish flu there were no antibiotics.
 

Spanish Flu Lessons for the Stock Market

In addition to caring for health, investors are, of course, also very concerned about the state of the global economy and the future development of stock markets. In this context, however, the stock market trend can be seen from the course of Spanish flu, which may again become relevant at the current time.

As the Spanish flu began immediately after World War I, global stock markets were still in shock due to the war, but reached their preliminary highs in November 1916, but then again lost about 20 percent of their market capitalization in 1917. During the flu wave, that is, between 1918 and 1920, markets fell again by about 20 percent.

However, after the stock market crash, it can now be established that not all classes of stocks lost the same value at that time. Even then, stocks with low fluctuations and stocks with high dividend yield provided a high level of investor protection. Although these shares also showed a weak phase, parallel to the market correction, this was compared with growth shares or high-share certificates and shares with small market capitalization, but only a very short duration.


 

Through a crisis with a conservative strategy

With a focus on defensive dividend stocks and low volatility stocks, which are mostly found in countercyclical sectors, investors have taken their personal portfolio out of the crisis more than 100 years ago. This orientation assistance can help private investors, in particular, create their own securities account to protect themselves from crises, and now they are speculating or relying more on dividend aristocrats and reputable industries.

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