Human tragedy aside, the question worth pondering is: how worried should you be about the impact of the coronavirus on your personal wealth?
I’ll try to flesh out the probable and possible effects of this damn virus.
The first visual hit from COVID-19, as the medical experts call it, is on our television screens and smartphones when we check out the stock market.
The Dow Jones Index on Wall Street — the most watched money-measurer in the world — suffered this week its deepest weekly percentage losses since October 2008. And it’s bound to get worse in coming weeks.
Fear and uncertainty will hang around until we get good infections and death readings from places outside China.
In fact, on Monday the numbers out of China were on the improve, but then we learnt that there were deaths in South Korea and Italy — and that’s when stock markets spat the dummy.
Let me sum up the likely effects:
Stock markets will lose and could be down as much as 10 per cent, or even more.
Our super funds will have a bad quarter or two after a number of years of fantastic returns.
The unemployment rate will rise, as we are heavily dependent on China for demand for our exports. Companies such as JB Hi-Fi and Harvey Norman get a huge supply of TVs and so on from our best trading partner.
The government will stop promising a budget surplus for this year, as it will have to spend to offset the negative effects of the virus and the bushfires.
The Reserve Bank of Australia will probably cut interest rates again in March or April.
Wage rises will again be slow as the economy struggles to grow.
If the virus becomes a serious global pandemic, we could see a recession here. Trying to build your personal wealth could be a lot harder than 2019. We could even see house prices fall if a recession came along, so if you’re in a good job and you’re insulated from unemployment, then this could be a property buying opportunity.
If the virus is contained quicker than expected and the stock market falls, there could be good share buying opportunities, which could help you grow your wealth.
At least for the first half of this year, it won’t be easy to grow your personal wealth.
But in the second half, if the economy rebounds, stocks will too.
Fingers crossed that the coronavirus is nailed ASAP.
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