“We have fallen upon evil times, politics is corrupt and the social fabric is fraying”
On the Money: Alan Steel
Any idea who said that and when? Was it last year? Or last month, bearing in mind Donald Trump’s supposed impeachment, or does it refer to Brexit? What about the disturbances in France and Hong Kong? Spoilt for choice, eh?
If you’re like me you’ll be surprised to discover that they were found inscribed on a stone in a museum in Constantinople and dated from 3800 BC! Yes, really. So my old Latin teacher at Linlithgow Academy back in 1963 was right when he used to say that throughout history people don’t change. Generation after generation are attracted to negative news, preferring pessimism for some reason. And it’s always been that way. Bad news spreads like a virus.
Less than a month ago the headline worries were all about Trump (again) and tariffs. Or was it too much debt, or umpteen pessimists warning us that overvalued stockmarkets were on the cusp of a crash, repeating their annual negative mantra for a decade. Then out of left field came 2019-nCoV, better known as Coronavirus the latest pandemic health scare to induce panic.
By my calculations, we’ve had nine health panics since the Ebola crisis in 1976 which infected 33,500 and killed 13,500, a fatality rate of some 40%. SARS in 2002 had only 8,100 cases and killed 770, a fatality rate of over 9.5%. And whereas Ebola only spread to nine countries, SARS reached 29, more than Coronavirus so far. Touch wood.
By the end of January the World Health Organisation reported that there were 9,800 cases confirmed, and 213 deaths, a fatality rate of 2.2%. But it does seem to be spreading fast. I saw figures only days later suggesting that as many as 35,000 people were affected, mainly in China, with some 800 deaths which would keep the fatality rate much lower than any previous recorded pandemic.
But before you quarantine yourself in the toilet, appropriately masked, and rush to sell all your investments, let’s take a look at what has become overlooked these days… facts. So far. there have been no confirmed coronavirus deaths in the US or UK. It’s also worth noting that more than 10,000 Americans have died of the common or garden flu since last October. I also spotted a report from Wuhan where the virus originated that found the median age of those dying was 75. As usual it’s the old and the very young that are at most risk.
Last Friday, when the medical authorities finally wakened up to the seriousness of the virus and headline writers found something new to worry investors about, world stock markets fell. Over in the US where investors also had Trump’s possible impeachment to worry about, the market had “a bad day”. A bad day apparently is when the stock market falls by at least one and a half per cent.
Have you noticed that despite constant bad news dominating Bad News at Ten we’re fast approaching the eleventh anniversary of the Bull Market that kicked off on the 6 March 2009 when nobody was looking? And as the US stock market the shape of the S&P 500 (which is not a supercar race by the way) has more than doubled in the last five years, there have been 59 separate days when it fell by at least one and a half per cent! 59! Imagine that!
Recently Johan Norberg reminded us that “pessimism resonates”, and reported that “a YouGov poll found that just 5% of Britons think that the world is getting better” The Americans are more optimistic: “6% of them think the world is improving.” Shucks. More Americans believe in astrology than that.
As to China he reminds us that, less than 40 years ago almost nine in ten Chinese lived in extreme poverty. Now only one in ten do. In 1981 just half of the world’s population had access to safe water. Now 91% do. And there’s plenty more to rejoice over in terms of removing millions from poverty. If you dig below the gloom smokescreen you’ll find that humanity has never been safer, healthier or less unequal. Fact.
But in the meantime as the coronavirus dominates the headlines and probably will have some impact on global trade, if you do have growth equity investments in a portfolio or a pension plan that have had a great run over the last five or ten years it’s not a bad idea to turn off the telly and ignore those who pay too much attention to Henny Penny. The sky might be a bit darker right now but the chances are it won’t be falling down any day soon.
Alan Steel is chairman of Alan Steel Asset Management
Alan Steel Asset Management is regulated by the Financial Conduct Authority. This article contains the personal views of Alan Steel and should not be construed as advice. Do check your individual circumstances with your advisers.