While the near-term damage is likely to be more substantial, Morningstar’s biotech strategist Karen Anderson and energy analyst Preston Caldwell are calling the COVID-19 market sell-off a “gross overreaction” to a “severe but manageable flu.” The analysts say the longer-run impact to global GDP is likely to be just 0.2%, “We think a 10%+ fall in global equities since the outbreak began is a gross overreaction.”
The coronavirus is likely to exert a much smaller human and economic toll than current appearances suggest, according to a Morningstar analysis that runs contrary to some of the gloomier forecasts that have helped pound the stock market.
“Overall, we see a weighted average hit of 1.5% to 2020 global GDP and 0.2% to long-run global GDP,” said the report authored by biotech strategist Karen Anderson and energy analyst Preston Caldwell. “We forecast a muted long-term impact because damage to productive capacity will be small, plus economic confidence should quickly return once the virus subsides.”
Based on studies of previous pandemics — a designation the COVID-19 strain has not yet received — Morningstar estimated that the ultimate mortality rate will be about 0.5%… The analysts say they see the coronavirus impact “to resemble a severe but manageable flu.”
Morningstar forecasts that as vaccines come online and treatment gets better, the economic disruption will be equal to a “milder pandemic” as based on studies of swine flu, SARS and other similar situations. The firm says the market plunge, which has taken major averages near the 20% decline required for a bear market, is overdone… Still, the firm sees a substantial human toll — 8 million deaths globally, including some 200,000 in the U.S., well above high-end forecast for the flu of 61,000.
MacDailyNews Note: More info on the Prevention & Treatment of Coronavirus Disease 2019 (COVID-19) via the U.S. CDC is here. Track the Coronavirus COVID-19 Global Cases by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU) here.