As news reports keep coming in about more and more cases of COVID-19 around the world, it’s difficult to obtain reliable and succinct information about something as new, unfamiliar and dynamic as the Coronavirus. Businesses, consumers and the government are reacting more to the lack of information than to anything that might be described as definite or even probable.
That said, here are a few articles about Corona that you might find thoughtful and if not reassuring, at least somewhat informative.
The Short Term: Tech Industry Watcher Robert X. Cringely offers the first of two blog postings about the impact of Corona including what similar events in the past have taught us… and what’s different this time.
The Investment Perspective: Investment writer and economist Bill Maudlin looks at how this is like and unlike the Y2K crisis of 20 years ago: the supply chain impact; the Fed’s role and possible opportunities in his blog posting “Covid-19: A Crisis the Fed Can’t Fix.”
Ready, Set, Fear?: Stock market reversals this past week make investors wonder if the losses represent a new longer term bear market cycle, and whether the general economy can be far behind. Economist Brian Wesbury walks his readers through a thoughtful analysis of the impact on stock markets and the larger economy as he explores the question “Is it Time to Fear the Coronavirus?”
An Update from ITR: Brian Beaulieu, CEO of ITR Economics, wrote the following note over the weekend:
“The COVID-19 outbreak is clearly foremost in the minds of many of our clients and people in general. We are discussing it with our clients, and others, as a means to clear the way for a discussion about economics. We are not MD’s at ITR Economics but we know stats and history. Both are important and indicate that is unlikely a plague was about to be let loose in the US given our prior knowledge of the problem (unlike the Chinese), the status of the health care system in the US, and the statistics associated with COVID-19 specifically. Given the non-plague status of the outbreak and acknowledging there is hysteria in many circles, it is probable that the US consumer will perform as always: they will consume. We will watch this very closely. We will alert you if this changes. The correction in the stock market is disconcerting but we think this represents a buying opportunity. There is time to pause here and make sure the market stabilizes before acting. However, that is the direction we think investors should be leaning. We are also watching commodity prices, like oil, very closely as a “tell”. But our assessment currently is that the economy is larger than all of this. The leading indicators in the next several weeks and months will inform considerably. Thankfully our children seem relatively safe, and life goes on. So, let’s plan for our businesses and maximizing profits assuming that the rational behavior and economics will rule the day. The key issues in China appear to be logistics and getting people back to work in their factories following the new year holiday. I expressed confidence in the Chinese to overcome these issues, but it may take 1 to 2 quarters. Expect supply chain disruptions but expect them to be relieved in 2H20. Demand isn’t going to go away as the US consumer will continue to consume. Longer run, layered on top of tariffs and politics, expect this black swan event to hasten the shift away from China (and Asia in general) as a supply source and expect to see more nearshoring going forward. While they say change is a constant, the pace at which it occurs is not. Assess and seize the opportunities.”
Second Order Effects: In a complex system like the world, wise leaders have to go beyond simple cause and effect to further consequences, or “second order effects” down the line. This short article in the New York Times may help you estimate the unexpected impacts on your business.
