From the Noel Whittaker newsletter and some perspective on the...

From the Noel Whittaker newsletter and some perspective on the Coronavirus Media Barrage.

The coronavirus is showing no signs of easing, and of course it’s creating uncertainty in markets. But let’s take a long-term view and look at the graph below from my good friend Ashley Owen of Stanford Brown, one of Australia’s leading financial advisory firms.
Ashley writes:

Spanish flu hit near the end of the First World War, infecting an estimated 500 million people, up to one third of the global population. It killed an estimated 50 million people or around 2.5% of world population, which was three times the total number of people killed in the war itself.

Despite infecting one third of the world’s population, killing 50 million people and hospitalising hundreds of millions more, the impact on share markets was limited. In the immediate post-war years, share markets were hit by a massive bout of post-war inflation (20%+ in Australia and the US) and equally damaging fiscal and monetary tightening to fight inflation. Once inflation was brought down by sharp recessions in 1920-1, share prices took off and started the long 1920s boom driven by post-war housing, urbanisation and new technology – motor cars, radios and other household appliances.

The 1957 ‘Asian flu’ A/H2N2 virus is thought to have started in China’s Yunnan province from animal and human H1N1, and avian H2N2 virus strains, then through Hong Kong to the rest of the world. It killed 1 - 2 million worldwide, mainly infants and the elderly, including 70,000 Americans but only 2 in Australia.

Shares were unaffected by the crisis and kept rising in Australia and the US during the great 1950s post-WW2 boom that was fuelled in both countries by housing, infrastructure and consumer finance – not unlike the 1920s post-WW1 share boom.

The 1968-70 ‘Hong Kong flu’ A/H3N2 pandemic came in two waves across the world, the first in 1968-9 and second in 1969-70. It is thought to have originated as a mixed infection of an animal with human H2N2 and avian H3Nx virus strains in Asia. It killed an estimated 1 million world-wide, mainly elderly, including 34,000 Americans and 2,400 Australians.
At the time, share markets were enjoying the 1960s ‘space race’/ aeronautics boom in the US, which triggered the speculative mining boom in Australia, especially in metals like nickel which was used in aeronautics, and was also in high demand for armaments in the Vietnam War.

2009-10 – ‘Swine Flu’ or ‘Mexican flu’ – H1N1 originated in Mexico and spread around the world infecting between 700 million and 1.4 billion people and killing about 200,000, mainly the young, including 12,000 Americans and 1,600 Australians. For shares, 2009-10 was of course the great rebound from the GFC share market crash. Share prices powered through the flu pandemic and other crises like the European bank runs, first Greek debt bailout, Iceland and Irish bankruptcies & bailouts, the Dubai debt crisis, etc.