Considering the news about COVID-19 (Coronavirus) and that markets are notably off this week, we wanted to provide you with a few thoughts on the subject.
Historical Context
In the past, similar outbreaks have been transitory and eventually pass; but the risk to markets is if the disease spreads much more than anticipated. Expert opinion remains divided on when COVID-19 will peak as it is more contagious, but less deadly than previous viruses. Currently, there are no known vaccines and speculation is that it would take about 6-12 months to produce one. The tail risk is that the virus spreads outside of China, shutting down production, disrupting supply chains, slowing economic activity and ultimately weighing on corporate earnings. It’s also unprecedented what happens when a country of 1.4B people quarantines 50M people.
