Virtually all Americans are sensitive to the plight of those families affected by Corona Virus, or COVID-19, deaths. It seems every day we hear of more active cases and more deaths and this tends to add fear and concern to the general public. At this point, it has negatively affected far more people from an economic standpoint, including our clients who have investments in stocks and bonds, than it has people who have gotten ill from the virus.
No one is trying to downplay that this is serious and the quarantines aren’t helpful in limiting exposures, hospitalizations and deaths. We pray for everyone who is affected by the COVID-19 virus. At this point, that’s just about everyone (either physically or financially). But some perspective is important here as well.
On Friday, March 13 I attended a webinar put on by World Clinic founders Daniel Carlin MD, former US Navy Chief Medical Officer, Emergency Medicine, and William Lang MD, former White House physician. They provided data on the current pandemic that generally is not being shared with the American public but puts a decidedly different perspective on the risks associated with the COVID-19 virus. Here are some of the high points based on what they have seen so far (as of March 13, 2020):
The worst area in the world is the Wuhan province of China where there are over 11,000,000 people and an affected rate of 0.7%
- In all of China, where the rate of new infections is now low and stable, there have been about 81,000 reported cases out of a total population of 1,400,000,000, an infection rate of .005%.
- In the US, there are right now 2 areas of increased infection – in Washington and New York – both with more than 300 reported cases. There were 30 deaths in Washington (mostly in nursing homes) and 0 deaths at this point in New York (mostly concentrated in a younger, Jewish community).
- The commonly reported Case Fatality Rate (CFR) is 3.4%, the common actual estimate of CFR is 1.5% and the more likely estimate when all data is in (because not all cases will end up being reported) will probably be around 0.5-1.0% of individuals diagnosed with the virus.
- If you are more than 6 feet away from an infected person, it appears about 1 in 200 people will contract the virus, for those less than 6 feet away, 10-12% will contract the virus (hence the social distancing).
- 7 out of 1000 will require some care if they contract the virus. Of the seven, 80% will have mild symptoms, 15% may require some medical care like an urgent care center or emergency room, and 5% will be admitted to a hospital. So about 7 out of every 20,000 who contract the virus may be admitted to a hospital.
- Italy has been held as an example of a country heavily affected by the virus. This makes sense for two reasons: 1) about 25% of the population is over 65 and there is a relatively high incidence of cardiac and respiratory diseases, and 2) there are thousands of China guest workers in Italy. The COVID-19 in Italy started about a week after these workers returned from visiting China after the Chinese New Year. This fact is not being heavily reported.
If the statistics of the United States, which we would hope has a better health care system than China or Italy, are similar to the statistics reported by China, we would expect infections of around 16,500 and possibly around 600 deaths. As of March 13 there were 41 US deaths. The seasonal flu, by contrast, affects around 26.6 million people annually and causes 37,482 deaths. The Swine Flu in 2009-2010, resulted in 16,500 confirmed deaths. There are no quarantines for the seasonal flu and there were no quarantines in the United States for the Swine Flu.
Those are the facts behind COVID-19. The panic caused by the pandemic declaration, the cancelling of thousands of events and a substantial change in the day-to-day lives of millions of people will hurt our economy greatly in 2020 for what appears to be a virus that’s similar to others in the past where the United States took no real extraordinary steps to curtail activities. The key here well may be asking those more at risk to refrain from social interaction and those who are close to those at risk to refrain from close contact with those high-risk individuals (or the general public) until the virus dies down. It’s obvious at this point that crippling the economy will hurt far more people than COVID-19.
If this virus is like others, and so far statistically it appears it has many similarities, the stock market may recover relatively quickly. The S&P 500 was higher after one year that it was at virus outbreak for SARS, Avian Flu, Swine Flu and MERS. Given that, our best advice is to follow the time-tested models we use from the companies that have gone through multiple market corrections. These models – whether they stay in the market or sell out of the market – are based on rules created to potentially provide a balanced combination of risk management and long term returns in excess of their appropriate benchmarks. If together we’ve accurately determined your risk tolerance, the pain of this event should be – although unpleasant – within acceptable levels.
Please feel free to reach out to me if you have questions or concerns – we are here to help everyone through this.