Markets & Economy

The Coronavirus outbreak spread beyond the Middle East and Asia this weekend, rekindling fears of a global pandemic and roiling international financial markets. Reports of new cases surged in South Korea, Iran, and northern Italy as the global total of reported cases approaches 100,000.

Emergency containment efforts have slowed the widespread transmission of the disease, but they have been unable to suppress it. Most recently, South Korea’s new cases soared to nearly 1,000, the second largest number in the world. Elsewhere, Italy experienced an outbreak of several hundred cases, marking the first major outbreak in Europe.

The disease, now known as COVID-19, is suspected to have originated from animals at a marketplace in Wuhan, China late last year. COVID-19 has thus far killed at least 2,500 people. As of Monday afternoon, all but 27 deaths have occurred in mainland China.

Its outbreak is being viewed in the context of other high-profile viral outbreaks, including Ebola, SARS, and MERS. COVID-19 has spread more broadly and been deadlier, in terms of overall death toll, than all of them. This has driven the more aggressive containment measures and higher potential economic impact.

Flu-Like Similarities

COVID-19 can be thought of as a more aggressive flu. It is similar to the flu in epidemiology, and scientists now know that COVID-19 is a part of a broader class of viruses that includes SARS, another virus with flu-like symptoms. COVID-19 most severely impacts the elderly, as well as newborns and those with otherwise compromised immune systems.

The seasonal flu is mild by comparison. During the 2018-2019 flu season, influenza infected approximately 35 million people in the US. Of those 35 million, an estimated 34,000 people died for a death rate of roughly 0.1%. Currently, COVID-19’s death rate is much higher, estimated at between 3% and 5%. Fortunately, those under 18 seem to be less impacted by COVID-19 than they are by the flu, excluding those that are immune-compromised and newborns, based on early reporting.

Source: CDC

Difficulty Tracking Transmission

Containing COVID-19 remains a significant challenge. The disease is highly contagious, and it can sometimes take days before an infected person shows symptoms. This makes tracking and quarantining much more difficult.

Additionally, the disease is deadly, but not for everyone. Its medical impacts are unpredictable and not entirely clear. For example, 14 Americans were evacuated from a cruise ship in Japan last week after showing no symptoms. They were later quarantined as a result of positive test results from several days prior.

Scientists attempt to measure how contagious diseases are using what is known as an R₀ score (i.e., basic reproduction number). Also known as the basic reproductive rate, an R₀ score of 1 means that each existing inflection can be expected to cause one new infection on an unvaccinated population.

Measles, one of the most highly contagious diseases known today, has an R₀ between 12 and 16. Seasonal flu has an R₀ around 1.3, somewhat less than the 2 to 5 estimated range of SARS. At this time, the estimated R₀ on COVID-19 appears to be considerably lower than Measles and more in-line with most other diseases.

Economic Impacts

It remains too early to tell what the impact of COVID-19 will be economically. China is ground zero for the outbreak, and nearly 99% of cases are still within the Chinese mainland.

Even if the outbreak is contained, China is the third largest economy in the world—counting the European Union as one—and has enormous implications on travel and trade. Trade-driven economies across the globe are starting to feel the brunt of China’s extensive travel bans and internal quarantines. In the past few weeks, individual multinationals, such as Apple, have already pre-announced earnings disappointments as a result of the viruses’ impact.

We believe international equity markets may remain volatile until the state of uncertainty over COVID-19 is lifted. From time to time, unexpected market events will drive fear and uncertainty. During these events, we encourage investors to remain focused on investing with a long-term perspective.

For more information, you can read our previous article 3 Health Care Issues and the Coronavirus.

For a more recent and in-depth look at the Coronavirus, you can read Further Detail on the Coronavirus and its Potential Impact.