Morningstar: COVID-19 market sell-off a ‘gross overreaction’ to a ‘severe but manageable flu’

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.”

Jeff Cox for CNBC:

Morningstar COVID-19. Image: COVID-19The 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.


    1. They don’t think that 200,000 American deaths will have a severe economic impact. Maybe so, in the very long run.

      If this is the best spin the “another flu” party can come up with… well, ‘nuff said.

      1. Nearly 1.25 million people die in vehicle accidents each year, on average 3,287 deaths per day. And yet, our economy rolls on.

        200,000 fewer aged in U.S. nursing homes will have the impact on the U.S. economy of a pin dropped in the Pacific.

        You morons lack perspective utterly and completely.

        1. You may be correct. Maybe the abundance of caution is unwarranted. All those old people should just die off and self-correct the overpopulation. Apple should get all those Chinese workers back on the line pumping out electronic gadgets as fast as possible. Warren Buffett should step up beside The Donald to announce that between the two of them, they would pour $US 4 billion into Dow index funds and AAPL stock as a show of confidence for the marketplace. Jack should modify his Twitter so that any COVID chat is immediately deleted, replaced with ads for consumer electronics and tropical cruises. That’s what we really want, right?

          One may choose to make no change to his daily life, and he can tell everyone else what fools they are. You can tilt at windmills all you want, but fear and greed are both endemic to the stock markets. You’ll never be successful at convincing everyone that their fears are foolish. There is economic impact no matter how many sacrificial lambs (avoidable or unavoidable) you choose to count, or how you choose to categorize their deaths. In instances like this, I prefer to listen to health professionals rather than stock salesmen and carnival barkers.

  1. Don’t be too hard on them. They just are voicing an opinion which has no more basis in fact than anyone else’s at this time. The reality continues, how this is all going to turn out is a “known unknown.” Until it becomes a “known known,” the markets will be skittish.

  2. Some people care about other humans, some people only care about their almighty checkbook. You will see articles slanted hard either way.

    Just because you the wave hasn’t built in your local community doesn’t mean it can’t happen. For context: as of today, Italy has imposed a nationwide travel restriction. You need a police exemption to travel for anything other than work or emergencies. Some grocery stores also seeing supply shortages.

    Known infections: 9172 affecting all 20 provinces
    Deaths: 463
    In the last 24 hours, 97 people died. Spread is exponential, hospitals struggling to manage the surge of critical care patients.

    Known infections: 624 in at least 34 states
    Deaths: 26
    In the last 24 hours, 83 new cases reported. Actual spread unknown due to limitations on test availability. In hot spots, either voluntary or mandatory quarantines may apply.

    The spread may be less severe SO FAR in the USA, but why would anyone assume that this thing has run its course? It will be weeks or months before all business can resume as normal. Everyone needs to work together to use common sense precautions. Ignore the whipsaw market now, it’s not rational for anyone to attempt to predict it, nor offer simple one-line explanations for the stock movements.

  3. Typical that they call it flu so as to name it seem normal when in fact it is distinctly diferent and behaves differently from a flu virus as I have read only today in the Lancet and through other sources in Italy where clearly from a western perspective they gave the most experience though in all honesty we are in the very early stages of our understanding. They clearly want to minimise the dangers from this virus for largely economic reasons, so I would suggest people do their own research and cone to their own conclusions based on scientific and health issues not the economic ones.

  4. While I agree that the markets are over-reacting and should settle down, Jeff Cox, Karen Anderson and Preston Caldwell have clearly pulled their opinions out of their asses. As an epidemiologist, let me be clear. This is not the Fucking Flu and people need to stop calling it this. This is a highly lethal virus that will sicken and kill a large number of people all over the world, including here. The number of people dying and comparing that to traffic deaths misses the point about its impact on the economy. When people die in traffic or of the flu, the rest of us don’t stop going to restaurants, malls and social activities. This biased article trying to staunch the panic that is leading to the bleeding of the economy, is self serving for the interviewees and the author. None of us know how this will turn out and what ultimate effect it will have on the economy, including all of the idiots and their computerized programs selling and buying stocks like drunken sailors on shore leave! We are watching this illness spread worldwide and we don’t know how the virus will mutate and now that is a community based infection not a travelers disease, we need to realize that without any native immunity, this will likely be a significant illness. It comes from animals and it can go back into animal infections. What happens when we have an animal reservoir of this virus? There are an infinite number of ways this can play out and we will have to see how it does. At this point we don’t even know if we can pick it up from surfaces or not. The one thing we do know is that this is not the flu!!!

  5. A load of poppycock. It will take a long time for the world to recover. Where does the mortality rate of 0.5% come from. Italy is at 5%, China about 3% (If we can believe them) etc etc. Add to that, the severe lack of liquidity in the market is incredible. ( Check the repo problems which are now at record levels) If all was good , why are interest rates at record low (Read negative in some countries). None so blind as they that will not see)

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