Will The Coronavirus Financially Impact Me?
It seems like an annual event occurring every winter season—the latest virus epidemic ends up causing worldwide concern and, in some cases, panic. Some of you may remember the year that SARS was infecting people around the world. There’s been Ebola, Bird Flu, and the list goes on and on. The media usually encourages fear by blasting pictures of hospital wards or people walking to work in masks. Then shots patients getting vaccinations followed by stats as to what could happen if you don’t get all those shots. These viruses usually involve the respiratory system and include fever, coughing, pneumonia, body pains, and overall fatigue.
Coronavirus is an Epidemic – What’s That Mean?
Now, remember, the Coronavirus is not a pandemic; it’s an epidemic. An epidemic is when a higher than the average number of people come down with a disease within a specific area, like China. A pandemic is where the condition is worldwide. That’s not what we are dealing with at this time.
Additionally, it’s important to note that as long as you don’t have an underlying health issue compromising your immune system, most people who fall ill to these different types of influenza do end up recovering, Coronavirus included. That’s never the media’s focus, though. Death tolls always dominate the headlines. So much so, that in some instances, investors react, and markets take a nosedive.
Will the Coronavirus Financially Impact US Markets?
On January 31, 2020, the three major U.S. indexes all took a significant hit with the Dow Jones ending down more than 600 points due to the uncertainty over the Coronavirus. And it’s not just the U.S. feeling the pain as global markets felt the struggle as well. Additionally, on February 24, 2020, markets saw a sell-off due to more uncertainty surrounding the Coronavirus. This was one of the Dow’s biggest one-day drops of the last 3 years.
But why? Influenza rears its ugly head every year, and people die from it every year. The Center for Disease Control (CDC) reports that influenza has caused 12,000 – 61,000 deaths every year since 2010. So outside of a specific type of influenza virus which evolves every year just enough to prove past therapeutics ineffective, illnesses occur every year and the numbers of people sick explodes during the winter months. This is nothing new. Despite that fact, Wall Street is affected. How?
Will Coronavirus Impact World Travel?
Several countries have stopped airlines from traveling to China, and other countries have closed their borders in the hopes of preventing the spread of the virus. While tourism will most certainly take a hit, remember that China is the second-largest economy in the world and is the biggest consumer of raw materials. The country buys massive amounts of soybeans, copper, and steel, to name a few.
Sometimes we use copper to gauge economic health worldwide. However, over the past two weeks, the price of copper has fallen dramatically. It’s the same story for Brent crude, and when you couple that with the surprise increase in current oil inventories in the U.S., of course, there is going to be an economic impact.
Will the Coronavirus Financially Impact Manufacturing?
China is a manufacturing powerhouse as well. Businesses that depend on China for automotive parts, for example, have had their supply stream cut off. Nissan and Honda have closed their factories in Wuhan while the threat of spreading the Coronavirus is so high. Apple has closed as well. China is the biggest exporter of intermediate manufactured goods used to produce other items as well, so you can probably imagine the issues and disruptions worldwide.
Internally, China’s stock market took a hit when it started the week, and then almost immediately stopped on certain stocks when they hit the 10% limit that Chinese law oversees with most of those being a 10% drop. Now, being the economic powerhouse that China is, typically, their stock market is not of top importance in their overall economy. But, when you add in the problems the trade war with the United States along with the fact that the last 30 years have also seen some of the slowest economic growth, the smaller factors now make a difficult situation even worse.
How bad will the Coronavirus get?
How bad can it get? It all depends on how quickly the containment of the virus is and how fast people go back to work. There is always the unknown factor of how smoothly a transition that will be, because I don’t know about you. Still, after going through a necessary total shutdown of life outside of the home in general, I probably wouldn’t work as quickly and efficiently from the get-go. My mind would be going a mile a minute with thoughts like, “Did they clean this place and kill the virus? Do I want to touch this? Did that guy cough and not cover his mouth? I feel feverish…I knew I shouldn’t of come into work.” That’s just me, but I can’t imagine after living through that, that I would be the only one.
Dean Barber and Jason Newcomer sat down to discuss the Coronavirus, the Markets, and the Economy in our most recent Monthly Economic Update. Be sure to check that out if you want to stay up-to-date with how Coronavirus is impacting the economy and the markets.
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The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.