The past two weeks have been interesting. In this relatively short amount of time, around the world, we’ve seen a terrifyingly sharp decline in business; just about every major public event jas just been cancelled or rescheduled and an entire country go on lockdown. All this has happened with alarming speed as the world reacted to the new contagion COVID-19, or as many know it, the coronavirus.
I would like to preface this by saying this article will be mostly applicable to the situation in the United States, as other countries are facing very different realities than we are. China, where the virus originated, has been eerily quiet about much of their status, and Italy has put its entire country on lockdown for fear of spreading it. At least in Italy, this has brought public life to a standstill, and it looks like much of the world is following suit.
Domestically, many public events from Coachella to South by Southwest have been rescheduled or cancelled entirely. There have even been talks of shutting down school and transferring classes online as well. However, this halting of public life is creating the deadliest symptom of the disease: fear.
These last two weeks have been the worst two weeks for the stock market since 2008, and bond yields have dropped to a near-zero rate. In layman’s terms, fear of the coronavirus has created an economic disaster. This is not to say that the virus is not dangerous. As of writing this article, the World Health Organization has declared the virus a pandemic with over 115,000 cases world-wide. However, this disease is not a terribly deadly one, with only about a 3.4% mortality rate focused mostly on the elderly or people with compromised immune systems.
What is dangerous about it is its infectivity. It takes about two weeks for the virus to incubate in its host, and it is infectious for most of that time, meaning that one could infect others with the virus and not even know they are sick. This is a scary thought, but less than 1% of the population of the United States is currently known to be infected. Despite this relatively small number, the coronavirus has caused one of the biggest economic declines in the nation’s history.
However, in a place like Italy, where the concentration of the virus in its population is much larger, the effect has been exponentially worse. The complete shutdown of public life has had a major effect on the country’s production and service industries. Restaurants have been shut down and many of the factories in the country have been forced to slow production in order to contain the virus. Nevertheless, the number of cases, and deaths, have been steadily increasing. And, unlike the United States, Italy does not have the infrastructure to deal with this loss of business.
The coronavirus is effectively killing on two fronts: literal and economical. This is similar to the dictionary definition of a Black Swan, an event that has not happened before, and renders any predictive model moot. We have seen epidemics like this before (lSARS in 2003), but we have not seen this massive of an economic impact from one.
The fear the coronavirus has instilled in people has guided the economy into uncharted territory, and this could potentially lead to a deadlier outcome than what the virus could cause on its own. The best way we can fight this is by fighting the disease. Wash your hands, use hand sanitizer and cover your coughs. If we can beat the coronavirus, we can get the economy back on track.