Coronavirus and the Market

According to the World Health Organization, the Coronavirus is now present in 30 countries and is responsible for 27 deaths outside of China and as many as 2,663 deaths within China. They are still not calling this pandemic. However, markets are suffering around the world.

On Tuesday, Japan’s Topix was down 3.3% and Australia’s S&P fell 2.6%. On Monday, South Korea’s stock market fell 3.87% and Italy’s MIB index had its worst one-day performance since 2016. Monday & Tuesday both brought 3% drops to the United States S&P 500. This has only happened 15 times since the Great Depression.

This is not the first time that stocks have been affected by epidemics. In 2002-2003, there was a SARS outbreaks, which infected 8,100 people and 774 of which died. Also, in 2006 the Avian flu infected 228 and killing 130. And let’s not forget the 2014-2016 Ebola outbreak, infecting 28,616 people almost half of which were in just 3 counties in West Africa. In all these cases markets declined in the first month after the reported outbreak. By the time we were 3 months out, the market was again on the rise. Within 6 months markets had erased all loses. Wall Street’s reaction to these events is HISTORICALLY short-lived. Whether this will continue to be the case will greatly depend on government reactions and economic impact.

As far as the actual virus is concerned, although terrible, the actual human impact has been negligible. In the 2018-2019 flu season, there were an estimated 16.5 million cases of the flu, killing about 34,000 people in the United States alone. The measures being taken to combat the spread of the virus are tanking world markets. If these continue to increase we could be in for an even wilder ride!