still early days in the market turn, and instructive to look at market gyration during SARS outbreak in 2002-03. First known case Nov 02, and the STI turned down 14% over the next four-five months in Mar - Apr 2003. Then from June 03 the market rallied. Yay!
Dr Jyoti Somani and Professor Paul Tambyah, Infectious Diseases specialists from NUS Medicine, say that novel coronavirus cases may fall sharply by May when temperatures in the Northern Hemisphere - particularly China - warm up.
Yesterday, I had the pleasure of attending a forum discussion on the covid19 pandemic and its economic implications. A number of Singapore and Australia's top virologists, epidemiologists and frontline hospital managers were there.
While many of their revelations are already in the public domain, there were a couple of key takeaways. The first was that there is no question that within the next six weeks, the spread of the virus in Singapore will be under control. The circuit breaker will succeed.
The second takeaway was that a vaccine will be invented, although the likely time frame is, even on an accelerated basis, about a year from now. So until then, the war against the corona virus must depend on social distancing and personal hygiene.
Both of the above are actually within expectations for anyone binging on pandemic news. But one view expressed was relatively new to me.
This was that the virus would inevitably mutate to a milder form. This is because the virus itself is subject to Darwinian evolution, and the multitudinous individual organisms in the species are all seeking to propagate. Some are milder, and some are more aggressive. The aggressive forms of the virus are efficient killers. Once they find a host, they will eventually kill the human. And since the virus cannot survive without a host, the death of the host will cause the death of the virus.
As such, the evolutionary path of the virus will be mutation towards survival of the species in its milder form, since the killer units amongst them will kill their hosts and consequently kill themselves, while the milder form will survive. Darwinian evolutionary theory will lead to the survival of the non-killer version of the virus. This will take a couple of years but we will get there…
Most importantly, it is impossible for the virus to evolve to become more dangerous to homo sapiens. There will be no Hollywood World War Z scenario. SARS CoV-2's survival as a species must lead to coexistence with humans, i.e. eventually it will not kill people. Ebola ended in that way - it was an even more efficient killer than Covid19, and it essentially brought an end to itself. That's a good outcome.
As such, there will be a natural end to the Covid-19 Pandemic. It is just that the world needs to live through the time when this virus evolves to its own impotence.
So social distancing will be with us for the rest of this year, and with the summer hot season having some containment effect on its spread, the most painful period will be in the next two months or so.
There could indeed be a second peak in the next fall/winter starting around Oct but in the six months till then, the global health care systems won't be caught by total surprise. They would be more ready to deal with an expected problem, rather than a black swan event.
Given how the experts see the battle against Covid19 will pan out, the economic scenario will follow accordingly. As such, the world will suffer a serious recession due to the social distancing for much of 2020. Maybe the hot weather in the upcoming summer will help and provide much needed relief. If that is the case, the economy will bounce back in the third quarter leading to stability in the fourth.
If the summer cannot dampen the spread of the virus, or if countries open up recklessly before they are ready, then the trough of the recession will be deeper and the recovery will take longer. This will have to be countered by appropriate monetary and fiscal policies, now popularly and politically known as "stimulus packages".
If the Singapore experts in last night's forum are heard by an audience who can influence financial markets, then the current recovery in stock markets will speed up. The key is that their medical views are definitive. It is not the usual "if not this, then that" kind of opinion. The experts were clear what would happen. It is only the time line that is uncertain; but the outcome is unambiguous. This is what markets like. Unambiguous outcomes.
The stock markets in Europe rose yesterday, as the EC governments were urged to spend aggressively by German Chancellor Merkel who advocated a large stimulus package to counter the effects of the heavy economic costs of pandemic control. The Euro also strengthened. On that news, the US equity market also rose, but a strong rally was cut short by the revelation that the Gilead Remdesivir anti viral trials were not successful in China. Nevertheless, the markets have shrugged off the oil market collapse, and are on the mend. The US government also confirmed another bipartisan US$480 billion to help SMEs. The Dow and the S&P ended in positive territory.