President Trump tests positive for coronavirus: Here's how the market could react

President Donald Trump’s coronavirus diagnosis could create uncertainty for the stock market. Here’s what it means and how long-term investors should react.

U.S. President Donald Trump walks to Marine One as he departs for Bedminster, New Jersey, from the South Lawn of the White House in Washington, October 1, 2020.
Joshua Roberts | Reuters

The stock market was poised for a rough day Friday after news broke that President Donald Trump and first lady Melania Trump have tested positive for the coronavirus. Reportedly, he is experiencing mild symptoms.

The president revealed his diagnosis overnight in a tweet. Futures fell on the news. Less than an hour into the trading day, the Dow was down 0.85%, the S&P about 1% and the Nasdaq 1.70%. Later in the morning, however, markets began to stabilize on hopes of a new stimulus deal.

White House physician Dr. Sean Conley wrote in a memo that he expects the president to "continue carrying out his duties without disruption."

"The President and First Lady are both well at this time, and they plan to remain at home within the White House during their convalescence," Conley wrote.

Still, the president's diagnosis creates uncertainty for the market, which could lead to more volatility. Investors will "debate the implications this has for stimulus, reopening, and the election," wrote Vital Knowledge's Adam Crisafulli in a note.

Here's what you need to know.

'Major events will always move markets'

"Uncertainty is a part of investing, and major events will always move markets," points out certified financial planner Carolyn McClanahan, director of financial planning for Life Planning Partners.

The reason comes down to the market's perspective. "The market is a forward-looking tool," says certified financial planner Kevin Meehan, regional president for Wealth Enhancement Group. Its daily movements are less about what's happening today as it is about the bets investors are making on the short-term future, he says.

So it's to be expected that news of the president's Covid-19 diagnosis has shaken up market expectations for what that future looks like.

"It really brings into stark reality that we are potentially going into … a second wave," Jeff Henriksen, co-founder and CEO of Thorpe Abbotts Capital, told "Squawk Box Europe" Friday. "President Trump getting this really highlights that in a way that I think it will focus [investor] attention back on the virus and the effects it will have."

How to plan for stock market downturns

Video by Stephen Parkhurst

How to plan for 'the certainty of uncertainty'

Market uncertainty underscores the importance of keeping a long-term perspective, says certified financial planner Janet Stanzak, principal of Financial Empowerment LLC. It's normal for the market to fluctuate in the short term, but over the long haul, it has a track record of growth.

"Investors should not let short-term volatility drive emotional investment decisions," she says. "Always remember we are long-term investors. Never allow the daily volatility to cause you to deviate from a disciplined approach to investment decisions."

"We have a mantra: 'Plan for the certainty of uncertainty,'" Stanzak adds. "Today, we need to set expectations that this will occur. It's not unusual."

Why you shouldn't panic when markets are bumpy

Video by Stephen Parkhurst

Tune out the news if you can, Meehan suggests. "What we try to get people to focus on is: Your objectives are more important than the market," he says. "We can't control the market, so it's important to focus on the things you can control."

Namely, make sure you have the right mix of stocks, bonds, and other investments in your portfolio to meet your goals and feel comfortable riding out the markets ups and downs, says McClanahan, adding, "All investors should understand how much risk they can take."

"Once you come up with an allocation of bonds to stocks, stick with it and rebalance as the market changes," she says. "This keeps you from trading emotionally when market upheaval occurs."

And consider keeping the funds you need for short-term goals in cash rather than invested in the market, says Marguerita Cheng, a certified financial planner and the CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland. That helps ensure you're meeting those goals even if the market drops. It can also provide added reassurance that you're prepared for the present as well as the future.

"Make sure you allow yourself the time to stay invested," she says.

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