Looking for a SARS-style bounce

There isn’t much nuance in the reaction of institutional investors, asset managers, analysts, and pundits of various stripes to the ongoing Covid-19 crisis. It’s bad, bad, and more bad. Anyone who wants more informed, substantiated and quantified analysis of the situation from that perspective will be spoiled for choice. The following, therefore, is much more personal and anecdotal, and based partly on my own experience of living through the SARS outbreak in Hong Kong in 2003.

Normal life will reassert itself. This isn’t some special pleading for the US right-wing efforts to simply fly in the face of risk and reinforce business-as-usual whatever the consequences. But in Hong Kong, by the end of 2003, the financial markets, and even more telling, the public mood, had rebounded so far that the SARS outbreak might never have happened.

Yes, that was a very different case, with a much smaller concentration of people. Since the Covid-19 pandemic is far more widespread and more disparate I suspect that the bounce-back will be less dramatic and more protracted. All the same, it will come.

A second consideration is the absolute unquantifiability of financial risk. For all the black science devoted to calculation of this end of the risk/reward spectrum, the only certainty in investment remains the proverbial warning that past performance is not indicative of future results. The Covid-19 crisis exposed that brutally. It’s supposed to be a once-in-a-century pandemic, and yet we already brushed close to that in 2003.

Then there’s the dot-com bust in the early 2000s and the 2008 global financial crisis. How many crises do you need to demonstrate the certainty that your risk is, literally, incalculable? The only sure risk is the 100% certainty that you will lose your entire stake if things go badly wrong. I hope that helps.

Finally, the Covid-19 pandemic has done more to substantiate the whole notion of corporate citizenship than any amount of CEO statements or joint declarations. Businesses are falling over themselves to turn their plant and infrastructure over to manufacturing and distributing respirator masks, sanitisation fluids, and other essentials for fighting the pandemic.

Of course, cynics may protest that they can’t do anything else while their markets are effectively closed. But it’s a welcome reminder that businesses ultimately depend on people for their existence. It’s a rare luxury for a company to be able to indulge its own greed without regard for the population at large.

Public well-being is in fact an absolute necessity for business. It’s a pity it took so many deaths and so much disruption to remind plutocrats and politicians of that. Well, some of them anyway.