How pandemics affect stock markets | A historical view

There have long been large reaching health crises across the globe which have affected local economies, but only recently due to globalisation have we seen pandemics that have damaged global financial markets. Here we look into a history of pandemics and their effect on the stock markets, has COVID had the biggest impact relative to other pandemics?

As globalisation emerged and disease could spread far and wide so followed the negative economic effects. 

Graph from Yahoo Finance

Asian Flu

1957-1958 | 1-2 million dead

The US had the biggest focused effect of the Aisan FLu crisis. The first wave affected school children which coincided with an economic recession. The Dow Jones Industrials Average dropped 19.4% from summer to autumn of 1957. This event caused political tensions over the integration of public schools and the coming Cold War.

SARS

2003 | 774 dead

The Severe Acute Respiratory Syndrome (SARS) outbreak was a well managed disease outbreak wth only 8,098 people affected worldwide, mainly in China and Hong Kong. There was a few months delay between the break out in Nov, 2002, in March 2003 the S&P 500 had dropped 12.8%. 

The SARS outbreak saw IT, finance and communication services as the biggest losers worldwide with retail, travel and leisure suffering most in China. Overall, the world GDP took a 0.1% hit from the SARS outbreak. 

Ebola

2013-2016 | 11,310 dead

The Ebola epidemic was centred around Guinea, Liberia and Sierra Leone in West Africa. The greatest hit industry were airlines, cruises and hotels (as to be expected) with shares in American Airlines dropping 20% in a few days after news broke that an Ebola positive customer flew. Whilst service industries suffered, pharmaceuticals boosted. Tekmira Pharmaceuticals rocketed 200% over 2014. 

COVID-19

2020-ongoing | 2.8 million dead (Mar 21)

The global coronavirus pandemic is one of the largest health catastrophics of all time with far reaching socioeconomic consequences. Almost all countries are expected to enter into recession as a consequence of the pandemic. The World Bank predicts a 5.2% contraction in global GDP. If we look directly at stock markets, we can see the S&P 500 dropped 31% in March 2020 before recovering 12%. Stock performance has been rocky across the pandemic with extremely high volatility across the board. 

Most large indexes including FTSE, Dow Jones Industrial Average and the Nikkei saw massive drops as t Covid-19 cases soared over spring. 

The major Asian and US stock markets have since recovered following the announcement of the first vaccine in November, but interestingly the FTSE is still is overall negative since the pandemic began.

So what have we learnt… That disease outbreaks really mess with the global economy. But to look closer at it, we can see that the greatest hit industries are travel and services but these also make the greatest recoveries. We can also see medical and pharmaceutical providers are by far the biggest beneficiaries of these disease events. 

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Published by bullbear.io

Optimising trading success through competition and guidance.

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