R Naught

January 29, 2020 - Published by IAG Wealth Partners

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2019-nCoV has yet to acquire an acronym like SARS (severe acute respiratory syndrome) or MERS (Middle East respiratory syndrome), but its rapid spread through Wuhan, China, and surrounding areas is creating apprehension about another global outbreak of a lung-infecting cold virus. (Source: sciencenews.org)

How far will 2019-nCoV spread?

Scientists are working overtime to determine the virus’ R0 (“R Naught”), a ratio that attempts to predict how contagious a particular virus is. R0 is approximately how many other people one infected individual in a population could infect.

For example, measles has an R0 range of 12 to 18 (highly contagious), mumps’ R0 is 5 to 7, and the flu’s R0 is 2 to 5. Obviously different factors (environmental, population density, etc.) can increase or decrease a disease’s R0.

Thus far, it appears that 2019-nCoV has an R0 of 2 to 4 (similar to SARS). Since this is the third coronavirus that has spread from animals to humans, public health officials have learned valuable lessons from the past that will influence their decision-making in battling 2019-nCoV.

In addition to impacting individuals’ health and well-being, viral outbreaks also influence the financial markets. As 2019-nCoV has spread, stock traders have started selling stocks – particularly in emerging markets like China.

While scientists can calculate the R0 for viruses, there is no known method for calculating the R0 for stock market fear. Sometimes short-term events cause a pandemic of fear to ripple through the markets, and other times fear only infects a few.

We continue to pray that scientists are successful in developing strategies for limiting the spread the 2019-nCoV virus, but do not be surprised if the financial markets are infected with some fear until those strategies are proven successful.



Quote of the week: Michel de Montaigne: “There is no passion so contagious as that of fear.”

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