Is Covid still a threat to growth?
Introduction:
In late December 2019, the World Health Organization (WHO) was notified of a cluster of pneumonia cases in Wuhan City, China. Although it took some months for the significance to be recognized this was the emergence of Covid 19 a virus which caused an economic convulsion. Entire economies were forced into lock-down, unemployment soared, GDP slumped, and emergency fiscal and monetary measures were the order of the day.
The root cause was a virus which was not only highly contagious but carried a significant mortality rate. The human toll was immense not just for those infected but also through those impacted by the financial and social impacts of the isolation policy response.
For financial markets, understanding the medical response was a precondition to understanding how the virus and the economic impact would unfold. We were fortunate to have access to Professor Gerry Graham as an expert advisor in the area of biological sciences. Professor Graham’s insights proved extremely prescient, most importantly in how the vaccination programme would be likely to evolve and the timescale within which an effective vaccine could be deployed.
Uncertainty is the enemy of financial markets and this knowledge helped us to understand and place boundaries round the potential consequences and hence reduce this uncertainty. Although the pandemic has now ended, the virus continues to circulate.
It is a good moment therefore to revisit our original discussions with Professor Graham and consider those areas where the out-turn differed from the original expectations. This then allows us to consider what, if any, influence the virus may continue to have on economic activity.
For comparative purposes the original questions and answers are retained with updates in italics.
DR SANDY NAIRN, CFA, FRSE
Director, Global Opportunities Trust plc
September 2022
Important
This material should not be considered as advice or an investment recommendation. within are those The views expressed of the author and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information or opinions contained herein.
