I think China, S. Korea have shown us how to greatly reduce the spread of this virus - it’s a great experimental proof of a solution in the middle of the outbreak.
Some here say we need to watch Italy and perhaps we should. But Italy still seems to be an outlier likely for several reasons which I believe I discussed earlier - namely a much older demographic, a much higher population density and a much lower number of ICU beds per capita (about 1/3 of ours). That’s the perfect recipe for the worst case scenario in a pandemic.
We should watch other countries like China, South Korea, etc. which seem to be under better control. There are different methods being used, some which might be still effective but less disruptive to the economy than the complete shutdowns we are resorting to. China used aggressive shutdowns but South Korea seems to be having good results with early testing and quarantining without as much economic disruption.
I do think we should be prepared for multiple waves. All pandemics in the last hundred years or so have come in waves, with 2nd and 3rd waves coming in worse than the first.
If this virus reduces in the heat/humidity of summer, as it seems to, we may be coming to a natural end of this wave in then next couple of months in the northern hemisphere. In India, where summer is already starting in most of the country, corona virus spread is already very slow, even though social distancing just started recently as in the US.
It will likely start again presumably around the time of flu season next fall. The hope is by then, everyone will have their act together with therapeutics, and perhaps even an early vaccine. From a health safety point of view, we shouldn’t become complacent, however, and be ready for the next wave.
Yes, there may be waves. But given our past experience with viral epidemics and their natural course, I am still very optimistic overall for numerous reasons. The virus is unstable and the more virulent strains tend not to spread as far since they kill their host. People who recover develop a degree of immunity which protects them and also prevents further spread. We have identified the highest risk groups and are more vigilant in protecting them. Data also suggests that most people have mild symptoms or none at all (people we are not testing) so the actual number of people affected is much higher and the case fatality rate is likely much lower than any guesstimate thus far. These viruses are typically negatively impacted by warmer weather and greater humidity which is right around the corner. We have developed better habits including better hand washing which should continue. Last but not least, we should almost certainly have a vaccine within a year.
We reacted based on numerous worst case assumptions which still seem unlikely to occur.
From our stocks point of view, I am guessing wildly that we can almost see the light at the end of the tunnel because of the reduction in China, and therapeutics coming available in the next month or so, and all the fiscal and monetary stimulus. Hopefully in the next couple of weeks this panic will go down, people will have better info.
Lots of companies will end at a new stable lower level. I’m thinking our stocks growth rates won’t be too affected, and with the lower interest rates, we can even see a higher base level for our SAAS stocks. I’ve been nibbling at a lot of the great deals out there, and plan to do more buying on down days.
Given my optimistic view above, I agree that the longer term picture for our stocks remains intact, likely improved for some. In the best case, the prices stabilize and we can add to our highest conviction stocks before a rebound. I don’t think the viral pandemic will be the limiting factor. The biggest issues will be our further responses to the current pandemic as well as better planning for future pandemics. We need to develop a plan which does not cause as much economic damage. There are high value interventions which might be less disruptive than business shutdowns or community lockdowns - perhaps initial stringent travel restrictions from the areas of outbreaks and also more aggressive initial testing and targeted quarantining as well as better protection of vulnerable populations (mainly the elderly). Better voluntary social distancing and precautionary measures (simple hand washing) in future outbreaks might be very effective. I think we can do it.
Other factors outside this medical issue will likely be more significant in a few months - the impact of a recession, etc. The virus was just only partly responsible for the market drop.
Dave (an optimistic emergency physician)