Four days in February

Team Hewins
4 min readFeb 28, 2020

Monday seems like a long time ago. We sent out a letter about the Coronavirus Monday, and since then we have seen significant declines in equities and more news about the Coronavirus spreading.

Thursday the Dow fell nearly 1200 points, sliding into “correction territory” (a decline of 10% or more) along with the S&P 500 and NASDAQ indices; all three fell more than 4% as fear and uncertainty over the virus increased. Oil prices continued to decline as well[1].

Also setting records were bond yields, with the 10-year Treasury yield closing at a record low 1.296%[2]. So, bonds helped mitigate portfolio downside as equities declined.

Remember December of 2018. A rapid decline in equities culminated in a very bad Christmas Eve, only to be followed by a sharp rebound right after the holiday. The S&P 500 was bumping up against bear market territory with an almost 20% decline at one point in the fourth quarter. In fact, there were several fast declines of more than 10% in the S&P 500 in 2018[3]. After all that excitement, the net loss in the S&P 500 for the year was less than 5%, and that was followed by a gain of over 31% in 2019[4]. In the following chart, you can see history bears out strong returns following a 10% decline.


Right now, it appears that the selling is driven by fear, and no one really knows how bad this thing will become. We know that there is an experimental vaccine being tested. We know that some factories and stores like Starbucks are already reopening in China. We know everyone now has a better appreciation of how concentrated their supply chains are in China and how risky that can be.

What comes next? We don’t know. But we know that sharp declines like this often reverse themselves rapidly and unpredictably. Sometimes they continue to decline. This is no fun for anyone, but it is part of the deal for a long-term investor.

Stay tuned. More will be revealed. Above all, let’s hope we avoid large numbers of people suffering and even dying from this disease.


Roger Hewins

[1] Ostroff, Caitlin. “Dow Industrials on Pace For Correction as Virus Fears Show No Signs of Easing.” The Wall Street Journal, Dow Jones & Company, 27 Feb. 2020,

[2] “U.S. Department of the Treasury.” Data and Chart Center, 12 Feb. 2020, .

[3] Foimbert. “US Stocks Post Worst Year in a Decade as the S&P 500 Falls More than 6% in 2018.” CNBC, CNBC, 7 Jan. 2019, .

[4] Source: Morningstar Direct

[5] Chart Source: Dimensional, In US dollars. Past performance is no guarantee of future results. Declines are defined as months ending with the market below the previous market high by at least 10%. Annualized compound returns are computed for the relevant time periods after each decline observed and averaged across all declines for the cutoff. There were 1,127 observation months in the sample. January 1990-present: S&P 500 Total Returns Index. S&P data © 2020 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. January 1926-December 1989; S&P 500 Total Return Index, Stocks, Bonds, Bills and Inflation Yearbook™, Ibbotson Associates, Chicago. For illustrative purposes only. Index is not available for direct investment; therefore, its performance does not reflect the expenses associated with the management of an actual portfolio. There is always a risk that an investor may lose money.

Team Hewins, LLC (“Team Hewins”) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. The information contained within this letter is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any types of securities. Past performance is not a guarantee of future returns. It should not be assumed that diversification protects a portfolio from loss or that the diversification in a portfolio will produce profitable results. The opinions stated herein are as of the date of this letter and are subject to change. The information contained within this letter is compiled from sources Team Hewins believes to be reliable, but we cannot guarantee accuracy. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. For detailed information about our services and fees, please read our Form ADV Part 2A, which can be found at or you can call us and request a copy at (650) 620–3040.

Originally published at on February 28, 2020.



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