29 Jan Coronavirus And The Market
Every year or so there seems to be a new outbreak or health concern blazing its way across television and internet headlines for weeks. Banners and headlines warn us not to eat German lettuce or sneeze from the hours of 4:00 – 6:00 PM. As much as we like to blow these off as a passing story, the coronavirus is having a strong effect on the world, more the economy than anything. This article will help you stay informed as to exactly what is going on with the relationship between the virus and the global stock market, and exactly what the experts predict will happen.
So why is a virus having such a large-scale effect on the market? Even if it hasn’t amassed an epidemic scale death toll, these types of diseases put a halt to certain industries, especially if the virus is localized to one location, as it is in the specific area in China. Stan Choe of USA Today has stated that the stocks around the world have been affected just the same as outbreaks in the past. The main hits come to the industries that depend on consumer spending. People are going to be fearful of eating out at restaurants, due to contamination concerns. People are definitely going to be staying away from traveling as much as they can, especially because of the chances of an airport being contaminated. People will most likely be shopping less as well due to the fear of imported goods and the general fear of being out in public.
The travel industry however will be seeing the worst of it. Many of Europe’s more luxurious travel locations see a great deal of their business from Chinese citizens. Hawaii will see the same problem, and for a state which lives and dies on its tourism industry, this is a very large blow. For the residents of Hawaii, let’s hope that this outbreak doesn’t last very much longer. Wuhan, the main site of the contamination, is a very large industrial center for China, supplying many businesses globally with steel, smartphones, and automobiles. So, expect to see these industries hit. Maybe not as hard as travel, but we should prepare for visible effects.
Now, it really isn’t the end of the world. Michael Rush of Market Watch has given us some comforting facts on how this whole story is being blown out of proportion. Although the outbreak is very real, the fears of the public are being blown way out of proportion.
First of all, every past contamination has been handled successfully by the world’s medical efforts. Ebola, Severe Acute Respiratory Syndrome, and the Middle East Respiratory Syndrome were all successfully curbed before any major global damage was done. Our medical advancements have come a long way, even in the last decade alone. Also, the lock-down really only affects a small amount of the total world population. It is actually localized to only 4% of China’s total population. That’s not to say that these people are infected, but that they live in the infected region.
As far as the public goes, I am sure you are aware that people as a herd have a tendency to over-react to headlines that they see on the news with an exclamation point at the end. Words like, out-break, virus, and quarantine all scare people into inaction, just like the stock market. On top of this, Andrew Tilton of Goldman Sachs states that if there were to be a large-scale drawback on the market it would only last a few months before it bounced back to its standard healthy self. The main withdraw from the market would be the sectors directly dependent on consumer spending.
Long story short, this outbreak is real, no doubt about it. But we do not live in the dark ages. There are seasoned professionals around the world doing everything within their power to contain this outbreak and stop it from getting any worse. At the end of the day our hopes, best wishes, and prayers go to all those effected as well as their families. Make sure that you plan well for your finances and your well-being. Plan Smarter Live Better