Morningstar reportedly thinks the global stock plunge in reaction to coronavirus fears is a “gross overreaction” to what the financial-services giant called a “severe but manageable flu.”
A steady rise in the number of U.S. cases of COVID-19, a highly contagious and sometimes fatal respiratory illness, has concerned health officials and spurred calls within Congress for action to expand testing and avert an economic meltdown.
Nearly three quarters of U.S. states now have confirmed COVID-19 with over 800 Americans infected, Washington state's governor warned of tens of thousands more cases without "real action" and New York's governor deployed National Guard troops as a containment measure in a hard-hit New York City suburb.
However, the coronavirus is likely to exert a much smaller human and economic toll than current appearances suggest, according to a Morningstar analysis that runs contrary to some of the gloomier forecasts that have helped pound the stock market, CNBC reported.
“Overall, we see a weighted average hit of 1.5% to 2020 global GDP and 0.2% to long-run global GDP,” said the report authored by biotech strategist Karen Anderson and energy analyst Preston Caldwell.
“We forecast a muted long-term impact because damage to productive capacity will be small, plus economic confidence should quickly return once the virus subsides,” the report said.
“We think a 10%+ fall in global equities since the outbreak began is a gross overreaction,” Morningstar said.
The analysts say they see the coronavirus impact “to resemble a severe but manageable” flu.
More than 116,000 people have contracted the coronavirus worldwide with over 4,000 deaths since it surfaced in China late last year, according to the World Health Organization. It has spread to more than 100 nations. Italy, which has the highest death toll outside of China, has put its entire population of 60 million on virtual lockdown.
Along with the more than 800 U.S. cases, there have been 28 deaths, most of them in Washington state, according to a tally by Johns Hopkins University. New Jersey on Tuesday reported its first coronavirus death.
At least 35 U.S. states and the District of Columbia have reported infections of COVID-19.
However, Morningstar forecasts that as vaccines come online and treatment gets better, the economic disruption will be equal to a “milder pandemic” as based on studies of swine flu, SARS and other similar situations.
“We see reason for optimism surrounding vaccines and treatments.”
For his part, President Donald Trump said the coronavirus outbreak would "go away" and urged Americans to remain calm as cases jumped and the White House came under mounting pressure to boost its response to the health and economic crisis, Reuters explained.
"It will go away. Just stay calm. It will go away," Trump said after a meeting on Capitol Hill with Republican lawmakers. "We want to protect our shipping industry, our cruise industry, cruise ships. We want to protect our airlines industry."
Trump, who in the past two days has broached a payroll tax cut and relief for companies hard hit by coronavirus fears, offered no specific details on what had been discussed in a meeting with his top economic officials.
The White House has come under attack for a lack of epidemic preparation by the U.S. Centers for Disease Control and Prevention (CDC) and early problems with their coronavirus test kits that delayed confirmation of results.
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