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Markets may be underestimating coronavirus costs: this is what I am doing

first_img Michael Baxter has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Simply click below to discover how you can take advantage of this. Markets may be underestimating coronavirus costs: this is what I am doing Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. “This Stock Could Be Like Buying Amazon in 1997” Image source: Getty Images center_img Enter Your Email Address Our 6 ‘Best Buys Now’ Shares Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! The human consequences of the coronavirus virus are tragic and of primary importance. However, the significant economic consequences should not be ignored. The fatality rate of the coronavirus appears to be around 2%, compared to 9.6% for SARS, 34% for MERS, and 50% for Ebola.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…However, the coronavirus is spreading rapidly — by 30% a day, according to Kambiz Kazemi of Toronto-based investment management firm La Financière Constance. He projects that by the end of this week there could be over 80,000 cases.That is terrifying. If the 30%-per-day growth rate is accurate, and holds up, then most of the world’s population could potentially be infected by the end of March. Of course, this is highly unlikely for the simple reason that authorities are taking steps to curb the spread. For example, already 10,000 scheduled flights within and from China have been cancelled.Comparisons with past diseases outbreaks don’t help much. The SARS epidemic, for example, occurred when the Chinese economy was much smaller than it is today. Back then, China’s economy was growing super-fast, and SARS merely slowed the growth down a bit for one quarter. By contrast, at the end of 2019, the Chinese economy suffered its weakest quarterly growth rate in 27 years.Exponential changeAt the moment, there is so much we don’t know about the coronavirus – no one knows how quickly it will be contained, how widespread it will become, or what the economic impact will be. We do know that a 30%-per-day growth rate is an example of exponential changeCompanies that rely on China for their manufacturing are especially vulnerable. The types of products that are frequently manufactured in China include smartphones and pharmaceuticals. Around 15% of all drugs are made in China.A decline in the number of Chinese holidaymakers, if only for a few weeks, will also have a massive impact on tourist industries including airlines and hotel chains. If global authorities react to the threat the virus poses by cutting down on international travel beyond China, then the economic impact will be much greater.At worst, we could see a worldwide travel ban on the scale of the one currently in place in the Wuhan province. Sectors which are struggling as it is, such as retail, may be pushed over the edge. However, online shopping may become even more popular.It is well known that the markets hate uncertainty— and yet, so far, I would say that the market reaction has been remarkably sanguine — Chinese stocks have fallen sharply, but as I write these words, the FTSE 100 is up on the morning’s opening price.This makes me wonder whether some people have done their maths. Humans don’t instinctively understand the implications of exponential change, and the spread of the coronavirus is certainly following an exponential trajectory. That is why I think the markets are underestimating the potential cost – they have not priced in the effect of exponential change. Over the next few days and weeks, our understanding of what the coronavirus means will improve massively.I think there is a good chance that as this understanding grows and the implications of an exponential growth rate in the spread of the virus sinks in, we will see sharp market falls, maybe very soon. At some point, however, as hard facts replace theories, as news replaces rumour, or maybe as a cure or vaccine emerges, the Chinese economy will begin to recover, and markets will surge. The opportunity for investors will emerge at the moment this happens, so I would wait for that moment before buying. In the meantime, an online retailer such as Boohoo may be worth considering.  Michael Baxter | Monday, 3rd February, 2020 See all posts by Michael Baxterlast_img

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