January 2020 threw investors a curveball. Just as tensions between the U.S. and Iran were cooling down, a new coronavirus outbreak in Wuhan, China began spreading rapidly across the globe. Within days, it went from a regional concern to international headlines, grinding China's economy to a halt during what should have been its biggest celebration of the year.

These kinds of unexpected shocks are what financial experts call "black swan events." They're rare, hard to predict, and can have massive consequences. But here's the tricky part: when an epidemic first breaks out, we're dealing with far more questions than answers.

Think about what investors face in these situations:

The damage so far might be relatively small. Yes, people are getting sick and the death toll is rising, but in the grand scheme of global markets, the immediate financial impact is still limited.

The potential worst-case scenario is terrifying. What if this becomes a global pandemic? What if it shuts down major economies for months? The range of possible outcomes is enormous, and the worst possibilities are genuinely scary.

Nobody knows the actual odds. We know the risk is higher than it was last week, but by how much? Should you sell 5% of your stocks? 20%? Do nothing? There's no formula to give you the right answer.

This uncertainty creates what behavioral economists call "loss aversion."[1] Research shows that people feel the pain of losing money about twice as intensely as they enjoy making it. When faced with a scary but unclear threat, many investors panic and make decisions they'll later regret.

The 2003 SARS epidemic offers the closest comparison to what we're seeing now. Back then, investors watched nervously as the disease spread from China to other countries. But here's an interesting pattern: market panic tends to peak right when media coverage reaches its most intense point.

During SARS, Hong Kong's Hang Seng Index hit its lowest point almost exactly when The Economist put the epidemic on its cover. It was a classic case of maximum fear meeting maximum headlines. After that? Markets recovered.

The 2014 Ebola outbreak in West Africa showed a similar pattern. The S&P 500 had two noticeable dips that year, and both lined up perfectly with spikes in Google searches for "Ebola." Once again, The Economist's cover story arrived right at the peak of investor anxiety. And once again, markets bounced back once the outbreak was contained.

Today, information travels exponentially faster than it did in 2003. What took weeks to unfold during SARS can now happen in days or even hours. That means the panic phase might hit harder and faster, but it also means we might reach the turning point sooner.

For a more recent example, look at South Korea's 2015 MERS outbreak. The disease spread rapidly for about three weeks before authorities got it under control. The last death occurred roughly a month after the outbreak began.

The economic impact was real but manageable. South Korea's central bank cut interest rates to support the economy. The Korean won weakened against the dollar, though not dramatically. And then, relatively quickly, things returned to normal.

The current coronavirus outbreak is following a remarkably similar trajectory so far. The Chinese yuan has already weakened against the dollar, reversing its recent gains from the trade negotiations with the United States.

There are three big reasons why we can't simply assume this will play out exactly like MERS:

China's economy is much bigger now. Back in 2003 during SARS, China was an important but not dominant player in the global economy. Today, it's the world's second-largest economy and deeply integrated into every supply chain you can imagine. When China sneezes, the whole world catches a cold (pardon the unfortunate metaphor).

The timing is terrible. This outbreak coincided with Lunar New Year, when hundreds of millions of Chinese people travel to visit family. That makes containing the virus much harder. Chinese authorities extended the holiday to try to limit the spread, which means factories stayed closed longer and economic activity took a bigger hit.

Currency instability adds another risk. If the yuan weakens much further, it could breach the psychologically important level of 7 yuan per dollar. That could reignite trade tensions between the U.S. and China at exactly the wrong moment.

Here's the honest answer: unless you're an epidemiologist with special expertise in viral outbreaks, you probably don't have better information than anyone else. And without better information, making big portfolio changes is basically just guessing.

History offers some comfort. Most health crises have caused short-term market disruptions followed by recoveries. The key word is "most." We can't predict with certainty how this particular outbreak will unfold.

If your portfolio is properly diversified across different types of investments and geographic regions, you're already better protected than most people. The diversification you set up for normal times is specifically designed to help you weather abnormal times like these.

The uncomfortable truth is that sometimes the best action is no action. Wait for clearer information. Let the initial panic settle. Watch how containment efforts progress over the coming weeks.

Does that feel unsatisfying? Absolutely. Our brains are wired to do something when we feel threatened. But in investing, doing something just to feel better often makes things worse.

The investors who historically came out ahead during epidemic scares were the ones who either stayed the course or, if they had cash available, bought quality assets when panic pushed prices down. The ones who regretted their choices were usually those who sold in fear near the bottom.

Nobody knows exactly when this epidemic will peak or what the final impact will be. But if history is any guide, the headlines will eventually fade, normal life will resume, and markets will move on to worrying about the next thing.

In the meantime, wash your hands, check on your loved ones, and resist the urge to check your portfolio every five minutes.

This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. All investments involve risk, including the potential loss of principal. Leveraged ETFs and other complex investment vehicles may not be suitable for all investors and should only be used with a full understanding of their risks. Asset class performance varies over time, and diversification does not ensure a profit or protect against a loss. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. The opinions expressed in the communication are solely those of the author(s) and are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed. Mutual funds and other securities are offered through De Thomas Wealth Management, a mutual fund dealer registered in each province in which it conducts business and a member of the Canadian Investment Regulatory Organization (CIRO).