KEY POINTS:
- The impact of Coronavirus on U.S. equity markets has become more significant over the past few days, as markets fear the impact on the U.S. will be larger.
- The S&P 500 down 6.1 percent since its recent peak on January 17th, 2020, after China reported the virus to the World Health Organization. This suggests markets believe that the economic impact on the U.S. will be small.
- At the same time, the equity market impact of the virus has been similar to that of SARS after five weeks. As SARS spread, the economic impact grew, and equity markets responded.
- Equity markets fell 12 percent at their nadir after 15 weeks of SARS.
ECONOMIST CORNER:
The discovery of Coronavirus in Wuhan, China has drawn comparisons in some corners to SARS. To compare the relative severity of the diseases, we can compare the impact on equity markets of Coronavirus and SARS over the course of their development. Since equity markets incorporate all relevant information, they should provide an efficient measurement of the virus effect. The recent declines in U.S. equity markets follow a jump in 14,840 confirmed cases in Hubei, China on February 13, according to data from Johns Hopkins University.