Wuhan pneumonia is an emerging black swan, real impact to stock market depends on the final scale (last SARS crisis results in regional stock market crisis), need to monitor closely.
Short term impact on stock market is speculative: some healthcare (eg. glove manufacturer) stocks are rising in prices, while airline stocks suffer due to potential lower number of passengers with less traveling in an enclosed transportation. When this virus has similar scale as SARS, there is a potential to result in a regional stock crisis (eg. China / Asia) or even global financial crisis (if becoming a new form of global flu without an effective vaccine).
As mentioned earlier, in the final stage of bull market with over 75% optimism level, we are walking on a layer of thin ice, shorter term trading/investing is safer, ok to be “kiasi” (fearful of danger) for both daily lives (don’t go crowded place, staying healthy for stronger immune system) and stock investment.
Scale of “black swan” depends on severity of Coronavirus, eg duration and population of people infected (assuming fatality is around 2%). Currently it is still a mini bear for China stock market but having potential to grow into bigger bear if it escalates from health to social and even political issue.
Under the best case, it is likely a medical cure could be formulated within months, based on past knowhow on cousin of coronavirus, SARS. Under the worst case, it may evolve into a common global flu, when most people (survivor) has antibodies, the fatality rate may drop to a normal flu (eg. 0.05%).
The worst virus in mankind history was “Spanish Flu” in 1918 with 50 millions people die of 500 millions infected (about 10% fatality rate, close to SARS). Even so, it stopped eventually. Life will find a way. Virus also depends on human, won’t kill all the human. With advance in medical technology over the past 100 years, chances of overcoming Coronavirus is very high, just a matter of time, whether active or passive measures (eg. SARS just stopped after months of spreading). However, if human continues to make similar mistake, next crisis (or this crisis) may not be a just a financial crisis.
For smart investor, safer approach is to be a shorter term investor or trader when global stock market has been in high optimism > 75% while tested by various potential wolves (US-China trade war, US-Iran conflict, Coronavirus, etc) every few months. Learn to invest for opportunity from crisis: www.ein55.com
