Michael Markowski: Wuhan Virus & The Potential Of A Market Crash

Based on my reading the financial news and listening to the market pundits about the potential impact of the Wuhan Coronavirus the probability is very high that the global equity markets will experience a severe correction or maybe even a crash very soon. It’s because the virus has not yet been discounted by the global markets.   

The media is reporting and the pundits are saying that the virus will have minor impact. They cite the market statistics for the 2014 Ebola virus and the 2003 SARS virus. Read Bloomberg article, “Epidemics and Equities: What the Wuhan Virus Means for Markets”. View Bloomberg video entitled, “There Is No Reason to Panic Over Virus, Says OCBC’s Menon”.   

That reporters, analysts and pundits are making comparisons to the 2014, Ebola virus is ridiculous.Ebola cases were reported in only six of the world’s countries during 2014. These included five third world and emerging market countries; Liberia, Guinea, Sierra Leone, Nigeria and Mali.The US was the only developed country with 11 cases and two deaths.  

For the 2003 SARS virus, the primary thesis by the media and the analysts is that the markets declined and rallied substantially by the end of 2003.The reality is that the markets in the US and China had been in a steady decline since the bursting of the dotcom bubble in 2000.  The US market’s rally for the second half of 2003, coincided with the unemployment claims for the 2001 US recession peaking in June 2003.

Most importantly, the Wuhan virus is spreading much faster than SARS. The first case of SARS was reported on November 16, 2002. From then until February of 2003, the SARS cases spread very slowly.

The first cases of the Wuhan virus were reported by China on December 31. Since then the virus in China has grown exponentially to 1,287 cases and 44 deaths as of January 25, 2020. What is particularly disturbing is that China first reported an “outbreak of pneumonia of unknown etiology”, now named the Wuhan virus to the World Health Organization (WHO) at the end of 2019. Since China did not report SARS to the WHO until February 10, 2003, and only after hundreds had the virus, its likely that the Wuhan virus originated well before the end of 2019.   

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