The Coronavirus and the Impact on the Economy


What is COVID-19?

Virus Base Comorbidity Over age 70 R-naught (transmission)
COVID-19 1.5%-4.5% 6.0%-14.0% 8.0%-22.0% 2.0-2.5
SARS 10% Unclear 75%+ 2.0-5.0
MERS 30-40% Unclear 75%+ 0.3-0.8
Influenza 0.1% 5-20% 49% 1.25
  • It is a virus. It has no DNA and therefore cannot replicate on its own. The way it replicates is by invading a target cell and then using that cell’s reproductive ability to produce viral children.
  • There are a number of different coronaviruses, including the common cold, SARS and MERS. They vary in their mortality rates and severity rates. COVID-19 has a lower mortality rate but a relatively high transmission rate.


What is the mode of action? (source: National Geographic)

  • Unlike the coronaviruses in the common cold, which invade the upper respiratory tract, COVID-19 invades cilia in the lungs. Cilia are cells that act as sweepers, cleaning out debris. Ineffective cilia mean the lungs begin to fill with debris and the patient can develop pneumonia.
  • In the second step, the immune system fires off antibodies to clear the debris and repair the lung tissue. If your immune system misfires, it will go into overdrive and make things worse, destroying everything in its way, including lung tissue.
  • This creates significant lung damage, fills the lungs with fluid and causes the patient to go into respiratory failure.


What are the authorities doing about it?

  • Researchers are searching for a vaccine. However, the likelihood of this is low.
  • Some areas are going into lockdown.
    • In Japan, schools are closed until April 1.
    • In the UK, some schools have been closed.
    • In China, all Starbucks were shut down after the Lunar New New York.
  • Economic stimulus.
    • Hong Kong is giving each of its permanent residents HK$10,000.
    • The Bank of Japan, European Central Bank, People’s Bank of China, and Federal Reserve are all considering monetary stimulus measures.
    • The White House and U.S. Senate are discussing a tax cut package as part of the economic response to the coronavirus (source: Washington Post).
    • OECD: Ms. Laurence Boone wants joint statements from governments that they would support the economy as needed.


What has been the impact to companies so far?

  • Microsoft (2/26) – end demand on target, expect to miss Q1 guidance for Computing segment (33% of sales) due to supply.
  • Apple (2/17) – doesn’t expect to hit Q1 guidance due to supply constraints for the iPhone and demand within China.
  • New York Times (3/2) – expects advertising revenue to decline in the mid-teens, below prior guide of down 10%.
  • HP Inc (2/24) – expects an $0.08 earnings hit to Q2 but should not impact (i.e. should be recovered) for the full year. FQ2 earnings are expected to come in around $0.51. Analysts expect full-year earnings to be $2.21.
  • Coca-Cola (2/21) – expects a 2-3% impact to volume, 1-2% impact to revenue and $0.01-$0.02 hit to EPS for The company did not change its full-year guidance, suggesting this hit will be recouped.
  • Mastercard (2/24) – expects a 2-3% point hit to its expectation of 11-14% revenue growth in Q1, if cross-border travel remains at the current low levels. Other parts of the business are in line with
  • Starbucks (2/27) – has reopened 85% of its stores in China.
  • Constellation Brands, maker of Corona beer (2/28) – “We’ve seen no impact to our people, facilities or operations and our business continues to perform very well. Unlike many of our competitors, sales of our beer brands are focused almost entirely on the U.S. market.”



Please see our General Disclosure.

Subscribe to our mailing list

* indicates required