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Understanding historical impacts of pandemics on the financial markets

By Bob Post, Senior Vice President, Chief Investment Officer

As news of COVID-19 continues to permeate society, creating a “new normal” for millions around the world, the unrest in the financial markets has been one of the biggest impacts of this new pandemic. Indeed, the recent volatility of the stock market has caused tremendous national and global repercussions. A pandemic is defined1 as an outbreak of a new and infectious disease spreading quickly over large areas with the potential to impact large populations worldwide. And while evidential trends2 suggest that the occurrence of emerging infectious diseases (EIDs) will only increase with the prominence of a well-traveled and globalized society, it’s important to note that history is no stranger to pandemics, and neither is the economy.

To understand current and/or future pandemic impacts on the financial markets, one must review historical preparedness and responsiveness. Today’s article examines a few of the biggest pandemics in history, how each has affected (or is currently affecting) its country’s economy, and how being prepared is the best way to meet current and future challenges of a similar nature.

The Spanish Flu

Disease prevalence: The Spanish Flu erupted in 1918, toward the end of World War I. There are a few hypotheses for how this pandemic originated, but regardless, it left a catastrophic impact on the world population. One-third of the world’s population experienced the virus,3 and an estimated 50 million people died.

Financial impacts and regrowth

In order to understand the financial impacts of this pandemic, it’s important to recognize that most of those impacted by the Spanish Flu were working-age people between the ages of 20 and 40. In North America alone, 675,000 people died, causing labor immobility in a large part of the national workforce. However, since it was wartime, many citizens were compelled to continue working, despite the risks of exposure. While the U.S. did experience the financial consequences culminating from war and disease, the impact was short term with an annual output loss of only 0.4%4. Output loss is defined as "the difference between actual real GDP and its trend level." There was a modest hindrance to the business sector, but all were short-lived.


Disease prevalence: Severe Acute Respiratory System (SARS) first made its appearance in China, Vietnam, and Hong Kong in 2003. In comparison to the Spanish Flu, the SARS outbreak was small. It was spread by person-to-person contact. Globally, 8,098 persons5 became infected with SARS, and of these numbers, 774 died.

Financial impacts and regrowth

It’s important to realize that at the time of the SARS pandemic, China’s impact on the global economy was relatively minor, as they only commanded 4.2% of the global economy. However, fear of the unknown can be a significant predictor of economic loss. SARS slowed China’s economic growth from 11.1% to 9.1% over three months, but, overall, the long-term impacts were minimal6.


Disease prevalence: Ebola significantly impacted West Africa from 2014-2016 as it was the largest epidemic of its kind. More than 28,000 people were infected, and the total death count reached 11,000. The lack of established health systems in the region contributed to the rapid spread of the disease.

Financial impacts and regrowth

When the Ebola outbreak began, much panic ensued about the possible financial implications. At the onset, The World Bank estimated that the epidemic would cost $32.6 billion (as the worst-case scenario), but that estimate decreased to $2.8 billion one year later. Years later, although the affected West African regions are still experiencing reverberations of economic hardship due to the stigmatization of the outbreak with decreased investments from other countries, a growing economy is still evident.


Disease prevalence: Also known as COVID-19, there are currently more than 690,000 confirmed cases worldwide with more than 140,000 of those cases in the U.S. alone (as of March 30). The virus is expected to halt tourism revenues, but if past patterns are any indication of future economic outlook, the impacts will likely be short term. However, it’s a general best practice to be cautious at the forefront of any investment decisions as there is no way to truly predict at this point how the virus will impact the global economy. Current indications predict that global growth will be below last year’s rate of 2.9%.

It’s important to remember how these pandemics have impacted the Gross Domestic Product (GDP) in order to maintain a sense of sensibility about current and future projections in terms of diseases. Predictions are simply that: predictions. And these predictions are often the result of the markets reacting to potential loss of activity, not an actual loss of activity. The coronavirus is a current setback to the financial markets, but if history repeats itself, this setback is only temporary.

Preparing is the best strategy

As the Scouts of America say, “always be prepared.” Because of the crucial role financial institutions play in our economy, it is extremely important to have plans in place that outline how your organization will manage a pandemic threat.

In 2007, the National Credit Union Administration issued a guide for Pandemic Preparedness during the Avian Flu outbreak. Its resources for planning are still relevant today. In addition, Corporate One has long followed a strategy of maintaining a strong balance sheet with a strong capital position to ensure that we are ready to continue to support our members even in times of crisis. We have access to diversified funding sources, have robust resiliency plans in place, and are committed to the uninterrupted delivery of payment and liquidity services to our members.

Although this pandemic situation is unprecedented and challenging in many ways, being prepared has allowed Corporate One to remain confident in our ability to navigate it successfully. Feel free to reach out to your senior investment services representative or our investments department anytime at 800/366-2677 or with any questions.


2. Jones, K. E., Patel, N. G., Levy, M. A., Storeygard, A., Balk, D., Gittleman, J. L., & Daszak, P. (2008). Global trends in emerging infectious diseases. Nature, 451(7181), 990–993.
3. Konkel, Lindsey. “Why Was the 1918 Influenza Pandemic Called the 'Spanish Flu'?”, A&E Television Networks, 22 May 2018,
6. Keogh-Brown, Marcus Richard, and Richard David Smith. “The Economic Impact of SARS: How Does the Reality Match the Predictions?” Health Policy, vol. 88, no. 1, 2008, pp. 110–120., doi:10.1016/j.healthpol.2008.03.003.