I don’t want to make light of the Coronavirus, but I would like it to be kept in perspective. Each year the Influenza virus travels the globe with all its mutations. In the 2018/2019 year 42.9m were infected in the USA alone. There were 61,200 deaths (down from 2017/2018). The mortality rate is higher with Coronavirus, but we are seeing relatively few deaths at this point – circa 700.
During Chinese New Year celebrations, markets stay closed for the holiday period. China’s “big” fall was a catch up for the time they were closed. China’s Financial News published a commentary saying “the sell-off in the stock markets is caused by many irrational factors, or even a panic triggered by ‘herd effects.” The impact from the epidemic is “temporary” and “limited” and the first quarter’s contribution to full-year growth is normally small, according to the article.
China’s central bank took steps to cushion the economy from the Coronavirus by effectively cutting interest rates. This is an attempt to minimise the economic impact on China – and by inference the world. The idea is to reduce longer term impacts. Shorter term impacts are on tourism, transportation, hotels, catering, movies and entertainment.
China is more important to the global economy than it was at the time of SARS – but this time China’s response was quicker and stronger than before.
Bird Flu. There has been an outbreak of bird flu (H5N1) in Hunan province – yes, near the origin of the deadly coronavirus. Whilst humans can’t be easily infected, it is a killer – with a 60% mortality rate. Why is China such a hot bed for such diseases? (bird flu, SARS and coronavirus). Our view is the environment is being treated with a lack of respect and care – you only have to see images of the pollution to know this – perhaps this is a wakeup call.
Mathematically we use uncertainty to enter stocks knowing the outcome is going to be more positive than is currently in the price. One thing the market is very good at is taking a negative in its stride once the downside is understood. It wont stop the overreaction immediately, but as confidence in a less worse outcome builds, we will return to normality.
Britain has left the EU. The loss of Britain should have caused the EU government a huge dose of humility and introspection – we believe that in time other countries leaving the union.
Impeachment vote – was never going to result in Trump being ousted but let’s face it, it has been disruptive but has offered opportunities.
Reporting season volatility – watch for price spikes (up and down).
Michael Dee, Director, 0419 726223
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