Why the TSX lost 1,500 points in just one week and what coronavirus has to do with it
China could set example for what happens after an economic pause due to COVID-19
North American stock markets just had their worst week since the 2008 market crash. The Toronto Stock Exchange ended the week lower by 1,580 points and the Dow Jones Industrial Average lost 3,583 points.
Although the markets have been skittish around the spread of the coronavirus in China for some weeks, the Canadian sell-off began in earnest on Monday, as South Korea, Iran, and Italy began talking about containing the virus.
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"Nobody can predict how this is going to play out. We certainly have history as a guide for how other epidemics have played out, but the numbers in this particular epidemic are much larger and the world is a different place than it was even if you compare it with SARS."
On Wednesday, the U.S. Centers for Disease Control announced that a patient in California had contracted the virus without having travelled anywhere known to have the virus, nor being exposed to anyone who was known to be affected.
This raised questions about how many people this person could have affected without knowing it.
"And so, right now, we're dealing at a point of what I would call maximum uncertainty," said Marks.
China could set the pattern
In the midst of that uncertainty, market watchers are trying to figure out what might happen next and are looking to China for examples.
Although Beijing ended the extended holiday on Feb. 10, it took time for factories to restart in part because workers were restricted in their movement. Those factories are still thought to be operating under capacity
Every business, in my opinion, is going to suffer.- Barry Schwartz, chief investment officer, Baskin Financial
"I think a rational person using the base case right now is expecting that our lives are going to be significantly disrupted for a period of time and then it will be over," said Barry Schwartz, chief investment officer at Baskin Financial.
"But you know whether that means we have to work from home or we're not going to go to the shopping mall and we're certainly not going to travel to Italy. So maybe our summer plans are off. This is what people are trying to gauge."
Schwartz said that he expects a broad swath of businesses to be affected if COVID-19 gains a foothold in North America because people would choose to stay home.
"Every business, in my opinion, is going to suffer. Even the dentist. I'm not going to leave the house. I'm not going to go to the dentist office. People are going to be staying at home more and avoiding crowds and leaving their house and that's fine, we'll get past that. Probably the only company that will do fine here is Netflix," predicted Schwartz.
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There are indicators in Asia that could show how economies start to recover after the virus peaks and begins to ebb.
In an interview, Apple's chief executive Tim Cook said that Apple's factories are restarting in China as spread of the virus is brought under control. As well, Starbucks announced that 85 per cent of its Chinese locations have reopened.
"I think all the demand that we've lost here will recover," said Schwartz. "It's just really tough living through it."
Written and produced by Tracy Johnson.
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