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COVID 19: Time to Plan and Prepare. Not Panic.

COVID 19: Time to Plan and Prepare. Not Panic.

COVID-19 is in the air. Literally and figuratively, so to speak.  In the following note, we break the topic into specifics that matter most to us-

How does the mortality rate of coronavirus compare with that of the flu?
What is the contagion rate of the coronavirus?
At what point does the coronavirus become contagious?

Among several such questions that have been plaguing the world, these are some predominant ones, given the current scenario and the need of the hour. COVID-19 has been making it to the headlines at a pace that unfortunately resonates with the alarming rate of its spread outside of China over the past couple of weeks or so.

Let’s take a look at the Mortality Rate-

Mortality rate estimates for the new coronavirus are often cited as about 2%, though estimates have ranged from 1.4% to 3.4%. In comparison, the mortality rate for severe seasonal influenza is much lower, at 0.1%.

Though COVID-19 has already spread to more people worldwide than MERS, SARS and Ebola, it has fortunately, so far it been less lethal. The Estimated Case Fatality Rate for SARS was 10% and for MERS was 34%. For Ebola, it was around 40%.

How deadly is it? Here is the approximate case-fatality rate:

Signs, infact, suggest that many people may have had mild cases of the virus and recovered without special treatment. It’s important to remember that the original information from China probably resulted in an overestimation of the risk of death from the virus. Right now it appears that the risk of very serious illness and death is less than it was for SARS and MERS. Now as far as the total deaths in the United States is concerned, influenza actually is likely to cause more deaths today than COVID-19.

Once the number of asymptomatic or minimally symptomatic cases is known, the real fatality rate for new coronavirus may be less than 1%.

-Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases.
Next, let’s look at its infectiousness-

The measure of how infectious a disease is the Reproduction Number, R0 (R-naught).

The logic is very simple- An R0 of one means each person with the disease is likely to infect one more person. If the number dips below one, the disease will gradually diminish. If it gets much above one, the disease is likely to spread rapidly.

The common flu has an R0 of about 1.3. The most infectious disease measles has an R0 ranging from 12-18. As regards the R0 of COVID-19, epidemiologists are still unsure, as the estimates range from a low of 1.4 to a high of 6.5.

How contagious is the disease?
So, could COVID-19 spread as widely as the flu? If allowed to, then yes.
  • The main concern is that COVID 19 seems to spread even before it shows symptoms. However, studies are also revealing that pre-symptomatic transmission appears to be low enough such that COVID 19 can still be controlled in ways that the flu cannot.
  • We are still not seeing community transmission across the globe now, and therefore efforts to slow it down and contain it is still possible, as per the WHO Director-General. Therefore, even if it can’t be stopped, the key is to slow the spread before the entire system is overwhelmed.
  •  The infectious duration can also be shortened with treatment and quarantining people as soon their infection is known also effectively shortens the infection duration. The probability of the infection can also be reduced by frequent handwashing and reducing contact rate to the maximum possible extent by avoiding handshakes, etc.
Finally, let’s put things into perspective…

COVID 19 spreads even before it shows symptoms. Hence it needs a response that is different from other epidemics (COVID is not declared an epidemic).

The most effective response that we have today is a ‘lock-down’. It has shown results in China and is being implemented to varying extents by countries across the globe.

The Scientific community and Pharma Industry will rise to the occasion and find a way to contain or cure COVID 19, hopefully in a few weeks.

That said, what about the markets?

Turbulence in markets is given the uncertainty.

Asset Allocation and Stock selection is key in such markets.

If you are less than your strategic equity asset allocation: Add to your portfolio in tranches. Over the next few weeks and months. Be stock selective and choose your MFs carefully. Look at those businesses where stock prices provide value and business models provide growth and safety.

If you are already fully invested: Time to take a relook and rebalance the portfolio if required.

We’ll keep a close eye on things and see how it goes from here. Until then, the best advice would be to stay prepared, rather than panic. And finally, it goes without saying, stay safe.

Team Atom Privé

Boutique Wealth Management firm with a client-centric approach offering customized holistic investment solutions to create, protect and transfer wealth.

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