I haven’t seen a great primer on how COVID-19 impacts the businesses underlying stocks, so I’m putting down my thoughts here. Some key points:
- It is now pretty clear that it will disrupt the economy. Even if governments do not implement extreme measures, many consumers will. Most people will not go to retail stores and cinemas, causing them to have so few customers that they might as well close down.
- The virus has been successfully contained in China, South Korea, Hong Kong, Taiwan, Singapore, and Macau. These countries are working towards easing their restrictions and having life return to normal. In those countries, the worst has passed.
- Practically everywhere else, the virus is quickly spreading and is not being contained.
- The world is not ending. This is not the Spanish Flu and even that calamity did not cause stock prices to fall.