Thoughts on Investing: Economic Impact of the Wuhan Coronavirus – Our Understanding So Far

  |   January 31, 2020

With the emergence of the Wuhan Coronavirus, many have been asking what will be the impact on the global economy, and will the disease result in a recession?  While we do not want to discount the lives already lost to the disease, we do not think this will push the U.S. into a recession.

Background

The Wuhan Coronavirus appears to have developed first in bats and then spread to humans, making  it similar to the SARS and MERS viruses of the past. So far, the virus appears to have a similar level of contagion, but seems to be much less lethal — a lethality of about 2% compared to 10% for SARS and 34% for MERS. In order to combat the outbreak, the Chinese government has taken unprecedented steps to curb travel in order to contain the disease.  Although there is no current vaccine for the virus, research is moving swiftly.

Potential Impact

While all the deaths related to the disease have been in China, the coronavirus has been reported in 14 nations, including the U.S. At present, containment efforts appear to be effective, but things are still very preliminary.

From an economic perspective, market participants are attempting to assess losses in production with some reallocation of wealth towards health care. In the short term, we may experience some net losses in economic output, along with some volatility in the stock markets, as investors update economic forecasts with new information. However, at present, it does not appear the Wuhan Coronavirus will have a noticeable impact on global economic growth in 2020.


Copyright 2020 REDW Wealth, LLC. All Rights Reserved. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice.

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