The WHO upgraded coronavirus from a regional to worldwide health emergency. The stock market is far more vulnerable than it was during SARS.
The World Health Organization (WHO) declared the coronavirus outbreak a global public health emergency Thursday. The fast-spreading virus causes a potentially deadly respiratory infection. So far, coronavirus has infected over 8,000 people and killed at least 171. It has spread to 18 other countries from China, where the coronavirus originated in the city of Wuhan, including India, the United States, France, and Germany.
WHO has waited to declare a public emergency. But as the organization convened a panel Thursday to reevaluate the pandemic’s status, the CDC confirmed a new development. The first person-to-person transmission of coronavirus within the United States likely impacted the WHO’s decision.
An end in sight to the U.S.-China trade war vastly improved the outlook for stocks going into 2020. It seemed like nothing could stop the stock market bulls from pushing the Dow to to 30,000 in no time. Not even an unsettling brush with a shooting war in the Middle East. But the stunningly fast spread of the coronavirus, and its serious deadliness, put the bull market on hold.
The stock market went from euphoric to cautious in the second half of January as coronavirus spread. It rallied this week as the WHO hesitated to upgrade it from a regional to a global crisis. Now news reports show the virus spreading quickly all over the world. And health authorities are preparing for the worst. The market seems to be reflecting these fears as the major indexes struggled for direction.
Equities are more vulnerable to economic shocks from this virus than they were to SARS and H1N1. The last major global pandemics didn’t hit such an overvalued stock market. Those health crises struck at market low points with no room left to move but up.
But just as alarming is the fact that China wasn’t nearly as big or important to the global economy back in 2003. One analyst warns the epidemic could even be a “Lehman-type moment tipping point” for the Chinese economy.
It could plunge the entire world economy into another massive recession. Head of Research Patrick Perret-Green at economic intelligence firm AdMacro, even says the nervous markets are “far too casual” about the dangers:
If the WHO (World Health Organization) is correct and the virus impacts for months, it doesn’t seem unreasonable that it could knock at least 1% off China’s growth and 0.5% off global growth… it’s not inconceivable that China could tip the global economy into an effective recession.
Markets will have one more day to trade following the WHO announcement. Then two days to continue monitoring coronavirus developments while keeping an eye on futures movements. The first week in February could be disastrous for the stock markets if coronavirus keeps spreading at this rate.
Disclaimer: The reports and opinions in this article do not represent investment or trading advice from CCN.com.
This article was edited by Sam Bourgi.