May 3, 2020
Even though the constant media’s attention about the coronavirus creates many of us to become overly anxious, do realize also the many benefits that all this attention fosters.
With the enormous domestic and international focus about this coronavirus, information is quickly being disseminated throughout the world and, in particular, the United States so that each of us can take necessary precautions to stem the spread of this virus to ourselves and others. Many of us have already chosen to self-quarantine ourselves and avoid large public areas; to wash hands more frequently and avoid touching our faces; and to replace handshake greetings for the “new” elbow greetings, etc.
The hyper-focus attention on Coronavirus has greatly pressured the different layers of our government to quickly, collaboratively, and aggressively work to identify and treat affected areas along with providing timely and informative information for each affected area. In spite of Congress’s “new normal’ of gridlock nowadays, our legislatures quickly passed an $8.3 billion bill to help fight the coronavirus (wow—Congress can still pass bills!). The U.S. Center for Disease Control and Prevention (CDC) has already restricted travel; issued clinical guidelines; deployed multidisciplinary teams to support state health departments; worked with federal partners to support safe return of Americans overseas; and developed, tested, and equipped state and local public health labs with testing capacity—as of March 8th, 78 state and local public health labs in 50 states are currently using COVID-19 diagnostic tests. ¹
All this attention and our very volatile Markets have greatly influenced a group of major health insurers to waive copays for coronavirus; many businesses to instruct their workers to work remotely; some private businesses to help out including Amazon creating a $5 million relief fund to aid small businesses in Seattle impacted by the coronavirus; and many companies to actively create a coronavirus vaccine. ²
As of March 10th 2020, with over 80,000 contracted coronavirus cases in China (significantly more than the 804 contracted cases in U.S.), the increases appear to have leveled off in China. The other areas earliest affected—South Korea, Japan—also appear to have leveled off with new contracted cases and deaths. Since testing is and will be much more assessible in the United States, we know the contracted cases will increase. This does not mean more people are ACTUALLY being infected. Once we test many more Americans, we will likely follow the same trajectory of China, South Korea and Japan—a spike and then leveling off. With many fewer cases in America and all the help from our various governments, businesses, and individuals proactively changing their behavior, I believe we are very well equipped to quickly handle this outbreak in the United States—much more so than most large countries. And remember: the H1N1 virus of 2009 infected 60 Million Americans with over 14,000 deaths—substantially higher amount of people affected today. ³
Let’s look at the current U.S. Economy as of February 2020: the unemployment rate stood at 3.5 percent; 273,000 jobs were created; wages increased 3.0 percent, Retail Sales increased 4.4 percent; New Housing Starts were the highest since 2006; and the Service Sector Index jumped to 57.1 and Manufacturing Sector Index stood at 50.1 (both signs of expansion). With this coronavirus outbreak, we know the supply chain has been disrupted and consumer spending is decreasing, but this is likely very temporary as we gain more clarity and level off contracted cases. The Markets are overly sensitive to any information it cannot fully understand—very often overly selling and overly buying in the short term. How much have the Markets factored in the impact of this outbreak—too much or too less? Panics do create opportunities. As Warren Buffet famously stated long ago, ‘be fearful when others are greedy and greedy when others are fearful.” That adage has held true since he spoke it…⁴
Regards,
David
¹ https://www.cdc.gov/coronavirus/2019-nCoV/summary.html
³ https://www.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6
⁴ https://www.ftportfolios.com/retail/blogs/Economics/index.aspx
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