Don't panic and be prepared

The coronavirus is impacting the world economy in an extraordinary manner. Yesterday and today, the financial markets lost trillions of dollars. That’s about real people’s money as well as pension funds and other institutional investors. That’s wealth that simply evaporates. Every time a new person is found sick, here and there, specially in the most developed economies, that sends a shockwave across the markets. There is a massive reaction because the world has become a village and people are constantly on the move. Besides that, what is produced here needs components from afar and a supply chain that crosses half of the planet.

The key point at this stage is to be able to show to the public opinion that the epidemic can be contained. In addition, it is important to underline that most of the cases can be easily treated in the right hospital environment. Panic would bring a major global crisis.

Lots of billions lost to flu

Today, we are challenged again to reflect about resources, availability of wealth and how vast amounts of money can be spent wisely or just evaporate. It is also a call to reflect about priorities, decide on the appropriate ones and how to fund them. More concretely, all this is about uncertainty and its impact on capital markets, on short-term decisions and, in the end, on the minds of people.

Today’s uncertainty is about the coronavirus.

More concretely, almost every stock in the STOXX 600, the largest European share index, are trading since this morning in negative territory, in the red, as the specialists say. This represents around 180 billion euros the investors have lost during the day, just today. This is about 2% of the entire capital invested in those companies. But it is a lot of money that has faded away.

The investors are pessimistic about the impact of the virus and the capacity to control its transmission. A friend from the East Asia region told me that, in the current state of world affairs, “when China sneezes, the rest of the world catches the flu virus!” It is not exactly like that. But for sure the Europeans that negotiate in the capital markets got high fever today.