The impending coronavirus pandemic will put a cap on the market until there is a vaccine, writes Al Brooks.
The developing Coronavirus pandemic is a shiny object and we cannot take our eyes off it. It is constantly in the news. It will affect the stock market for many months and possibly until a vaccine comes out next year. The bulls will not aggressively buy until they are confident that there will not be a geometric increase in the number of cases.
If there is, that will significantly alter everyone’s habits. In particular, people will spend less money, and many will get laid off. They will go on fewer trips and they will avoid crowds at the malls, movie theaters, concerts and sporting events. They will also buy fewer unnecessary things for fear of being laid off in what they will see as a slowing economy. Consequently, a pandemic would probably cause a recession later this year.
Ignore the news, and think for yourself
The news media are not thinking this through. Instead, they are blindly accepting the best case scenario that government officials around the world are promoting. Everyone knows that there is a significant risk of widespread infections until there is a vaccine. That is a year away.
What we are doing now is medieval. They used containment in the middle ages during the plague. How well did that work for them?
The problem with containment is that the virus is already in too many places. That means that thousands of government officials around the world have to handle containment perfectly, which is not likely.
It is very important to note that we are behaving differently
The Coronavirus is changing our behavior much more than the swine flu did. Why? Because the American people sense that the news reports are underplaying the story. They believe that the government is not protecting us adequately because the government sees the problem as much less dangerous than we do. I bet the American people have it right. The news should be watching us and instead of us watching the news.
Worse than the 2009 H1N1 (swine) flu
The real goal this year is to “contain” the rate of spread. I think it is more likely that the number of cases will begin to increase geometrically like it did with the H1N1 (swine) flu in 2009. So far, 100,000 people worldwide have tested positive for the Coronavirus. That is similar to the first few months of the H1N1 flu. But within a year, more than 10 million people were infected worldwide with the swine flu and at least 100,000 died.
Currently, Coronavirus appears at least as contagious as the swine flu. Although many infected individuals have no or mild symptoms, the percentage of very sick patients appears to be greater. It is reasonable to assume that it ultimately will kill more people than H1N1.
I have heard people say that Coronavirus is not serious because as many as half of people infected with the Covid-19 (its technical name) have no symptoms. That is not a valid conclusion. Compare this with the common flu. More than the 75% of people infected with the flu virus who have no symptoms, yet 500,000 people die each year from the flu.
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