Investors know the coronavirus is a concern for markets—it knocked the S&P 500 1.6% lower on Monday, snapping a 70-session streak of moves smaller than 1%. How bad the outbreak could get is the critical question.
Cascend Securities, a fundamentals-based data and research company, took a look at the problem, building its own model to forecast what might happen. It’s a complex call.
To start with, China isn’t known for data transparency. While the official toll has risen more than tenfold in a week—the figures as of Monday were at least 4,500 confirmed cases and more than 100 deaths in China—some doctors, journalists, and residents of Wuhan, where the virus was identified, say that many more cases haven’t been reported.
The disease has also spread to multiple Asian countries as well as the U.S., Canada, France, and Australia, although with few cases so far.
Another big unknown is the virus’s rate of infection, meaning the number of people to whom one person could pass the disease. While Cascend initially estimated that the number was between 1.3 and 2.0, it based its research on a range of 2.5 to 4, reflecting the possibility that the coronavirus might be more contagious than previously thought.
When, and if, China is able to effectively quarantine all the possibly infected people is also critical to mapping the disease’s course. The longer it takes, the more infections will compound, especially in such a densely populated country.
About 9.3 million people currently reside in Wuhan, according to Cascend, and roughly 26.1 million people live within 300 kilometers of the city. Some 84.5 million people are within 600 kilometers, and 240.6 million are within 1,000. To put that into perspective, about 8.4 million people lived in New York City as of 2018, with four million in Los Angeles, and 2.7 million in Chicago.
China has already locked down Wuhan and 16 other nearby cities, effectively isolating a combined population of more than 50 million. All flights and trains leaving Wuhan have been canceled since Jan. 22. Still, many people that might have been exposed to the virus had left the city before the lockdown, and are possibly now carrying the virus all over the world.
Many countries, including the U.S., have been screening travelers from Wuhan at airports for symptoms such as fever, coughing, and difficulty breathing. But the virus has an incubation period of roughly 10 to 14 days, so some travelers might be contagious without showing symptoms.
If China can effectively quarantine its infected population by March, Cascend’s model forecasts, as few as 30,000 people will be infected, with 13,500 deaths. That is a lot of people, but as the Cascend report notes, the common flu kills 35,000 people a year and hospitalizes about 200,000 in the U.S. alone.
If the infected population isn’t quarantined by September, however, the number of infected people could reach 800,000, lifting the death toll to 200,000. The figures could reach 2.3 million infections and 600,000 deaths if the world can’t quarantine the infected population by the end of 2020.
Tuesday afternoon, the market seemed to be pricing in a less dire outcome. The S&P 500 was up 1% as investors focused on strong corporate earnings.
Write to Evie Liu at evie.liu@barrons.com
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