The human cost of the coronavirus cannot be underestimated. Now that the authorities are taking steps to limit further spread, one has to hope that the disease will be restricted from any more major growth. We may well not have hit the peak yet, but hopefully it is in sight. Then there will be a long tail of infections stretching into the spring and summer of 2020.
What will be the long term impacts?
It seems clear that the secrecy and delay of the Chinese government has created a mood-change among the population. What was an acceptance and even pleasure at the Chinese way seems to have turned to resentment and anger. We’ll look at this another day.
But what of the financial impact?
From the chart, it is clear that the Boris Bounce post-election has been brought to a halt. However, FTSE 100 remains higher than after the election, and the fall seems to have halted. The market seems to be looking through the inevitable short-term disruption to a resumption of normal service in just a few weeks time.
Coronavirus – a God-send to Failing Managers
Clearly the coronavirus is going to be a blessing to hard-pressed CFO’s wondering how to make excuses for poor financial performance. In the past, the go-to justifications to explain bad management were currency fluctuations or interest rate moves. Bizarrely, these flimsy reasons were accepted by the financial community. Nobody ever seemed to ask why the same CFOs hadn’t managed those risks in the same way that they managed the other risks of the business. Why didn’t they hedge the markets properly?
Then came Brexit, the perfect catch-all reason for management to cover up why they had failed.
And now here is coronavirus, a wonderful reason to show failure was an Act of God, and not incompetence. Has your pie-shop in Hartlepool seen falling sales – blame coronavirus. What if your newsagents in Warrington didn’t sell as many magazines as last year – it’s coronavirus. Do you run a major international oil-company that missed profit targets – coronavirus? Next it will be airlines and iron-ore supply companies saying that reduced demand from China drove then to a loss.
The minimal falls on FTSE 100 says that the market doesn’t believe there will be a long term effect of coronavirus. You shouldn’t believe all those excuses either!