The stock market is basically an information exchange were all different views are entered and the markets find their own level as do individual share prices. So, when markets initially ignored the threat of the coronavirus many investors were relieved that the markets “knew something” nobody else did. Was the virus contained? Was the real threat over?
We have seen an array of different viruses over the last decade or so many of which have proved to be deadly. The so-called “disease X” often mentioned by the World Health Organisation (WHO) has yet to materialise even though we have had some near misses. So, could the coronavirus turn out to be the mysterious disease X the one that takes out a huge number of the population?
The truth is that nobody knows; the fact that the virus has managed to jump from China to dozens of other countries is alarming. The fact that the virus can be spread by an individual before they even begin to show symptoms is a dramatic turn of events. While initially described as less life-threatening than SARS there are now growing concerns about how the “week two” symptoms can very quickly turn into pneumonia and other life-threatening medical conditions.
So, the reality is that nobody knows whether the coronavirus will be the mysterious disease X which wipes out a huge element of the worldwide population.
While markets have at the moment effectively discounted a potential knock-on effect to the worldwide economy, this is a real and relevant threat. Already we see the likes of Apple and car manufacturers such as Tesla struggling to import parts from China and other areas of the Far East. This is just the tip of the iceberg and we will see more companies following suit in the short to medium term.
When experts talk about an impact on worldwide economy they tend to talk in billions of pounds which is a lot of money but not really in the context of things. It could be very different with the coronavirus which is now in countries and cities where healthcare is perhaps not as robust as other more developed countries. As a consequence, there must be a real threat of the virus being passed on to potentially millions of people in the short to medium term.
Biotech companies working round-the-clock
We know that biotech companies are now working round-the-clock to find a vaccine for the coronavirus. There have been murmurs and whispers of a potential vaccine but nothing has emerged of any credence yet. It is highly likely that one of the many biotech companies operating on the edge of the latest technology will find a vaccine in the short to medium term. Producing the vaccination in huge numbers will be challenging, distribution will be difficult and there is literally the opportunity to charge whatever price they want.
It may well be that a quoted biotech company is the one that finds the best vaccine in the short to medium term. In this instance, there is potential to make a huge return but perhaps the major focus should be on protecting the worldwide population and containing the coronavirus? Or is this just simply capitalism at work?
While investors look towards stock markets for indicators regarding the seriousness of the coronavirus, we are in uncharted waters. It will be interesting to see how this pans out, whether the WHO has been to slow and conservative in releasing the dramatic warnings of the last few days. Should we take this as a final warning for the future?