Just How Badly Can the Coronavirus Mess Up the Stock Market?
What modern epidemics like Ebola and SARS can teach us about the possible impact of the coronavirus on global markets
Global stock markets plunged this week as the coronavirus outbreak continued to spread, stoking fears of global pandemic and an economic slowdown.
While we can’t predict the future, we can try to learn from the past. For example, if we look at how markets performed during prior epidemics — like Ebola, SARS, and swine flu — what do we see? Of course, this will never prove that the market reacted solely because of the epidemic, but it may provide a clearer picture than what prior analyses have shown.
Ebola
To start, let’s look at the West Africa Ebola epidemic in 2014. Below is a chart of the total number of Ebola cases in West Africa over time, except the “Pre-Peak” period is colored red (to represent uncertainty/fear) and the “Post-Peak” period is colored green (to represent recovery):
Of course, in real time no one would know that the peak was the peak (this is the privilege of…