Marc Cuniberti: The outcome of the virus
May you live in interesting times. With the last three weeks seeing the markets bouncing around like a proverbial ping pong ball, investors have to be wondering which way is up or down.
With the coronavirus causing global hysteria, many companies are sure to suffer and investors are doing the math and selling stocks.
Earnings no doubt will fall for many companies, and some by a lot. Because of the hit to earnings, some bankruptcies surely loom, and possibly some very big ones. The scope of the economic destruction will not be known until the virus is contained and the world returns to normal.
The actions being taken by companies, governments and citizens in response to the outbreak are unprecedented. Social isolation or distancing as the case may be is keeping us from one another, whole cities are closing down, entire states on are on lockdown and large scale state of emergencies are being declared. It is indeed something none of us have ever experienced on such a grand scale.
Who would have thought a month ago the world would become such a hazardous place that required such measures?
The news is moving so fast journalists like myself can’t keep up as each article or newscast we write is quickly rendered out of date, superseded by direr news seemingly more important than the last.
With much of the world coming to a virtual standstill, the only thing that isn’t standing still is the daily menu of unfolding events that span the globe.
No doubt this will have serious ramifications on global economies and their stock markets — and for how long is anyone’s guess.
It is not so much the number of people that will die or be infected that is doing most of the damage, but rather the fear of the unknown. Pandemic is a scary word and the very thought of the defenselessness of human beings from such a pathogen causes the onset of a panicky public.
Frankly I am surprised it has gone this far. Witnessing the steps the world has taken in trying to halt the spread of the coronavirus leads me to believe perhaps the cure is worse than the illness. I know I am not the only person to consider this and the idea is gaining more traction from many economic analysts and commentators.
Based on the current mortality rate, it is safe to say mankind’s existence is not threatened by coronavirus in its current form. Not so say it couldn’t mutate into something more deadly. Indeed, the SARS virus, another corona family of viruses that surfaced in 2003, had a mortality rate three times that of the current pathogen. The MERS virus had a frightening 34% kill rate. Both viruses, however, infected not nearly as many people as does the current strain.
That said, the modern world has never had a global shutdown.
Seeing as past slowdowns have devastated whole economies and caused untold misery in the form of widespread poverty, sickness and starvation, one can only imagine the hardship certain parts of the world will experience resulting from the current worldwide lockdown.
It is a hard conversation to have and one can liken it to debating the lesser of two evils. On one hand, continuing to isolate and basically halt 90% of worldwide commerce for weeks or months on end could throw many parts of the world into certain recession if not an all-out depression.
How many people will suffer or die as a result?
Starvation, stress-related illnesses, suicides and many other hardships will certainly take their toll on at least some of the world’s population. The final numbers will never be known.
So will be the result of our decision to stave off the event that is a worldwide pathogen by continuing a global shutdown.
Should we consider accepting an inevitable defeat, restarting our economies, and letting the virus roll through our populations, having been presented with no other logical choice?
It begs the question: are we facing a problem in which we must find a solution, or are we face to face with a predicament where there will just be an inevitable outcome?
Mr. Cuniberti is an investment advisor representative through Cambridge Investment Research Advisors Inc. a registered investment advisor. Marc can be contacted at SMC Wealth Management, 164 Maple St. Suite #1, Auburn. 530-559-1214. His website is moneymanagementradio.com. SMC Wealth and Cambridge are not affiliated.
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