Individuals traveling to the Olympic Games should take precautions against Zika, but do investors need to inoculate their portfolios?
“Of the 500,000 people expected to be visiting Rio de Janeiro for the 2016 Summer Olympics some may become infected with Brazil’s Zika virus and establish new outbreaks upon their return home,” Jeffrey Kleintop, chief global investment strategist at Charles Schwab, writes in his latest commentary.
Kleintop says it’s easy to imagine a nightmare scenario for any such event.
“The emergence of a lethal and rapidly spreading pandemic could lead to terrible human suffering and bring about far-reaching negative economic and market consequences,” he writes.
To determine the potential impact of Zika today on the economy and markets, Kleintop examines past world pandemics and their economic effect. What he finds is that these past pandemics have not had a significant effect on the economy.
“History shows us that the impact on the economy and markets has not been significant — even when the global economy was especially vulnerable to a shock,” Kleintop writes.
In particular, Kleintop looks at three relatively recent periods where the world’s economy and markets were especially vulnerable to a shock from a viral epidemic: 2003’s severe acute respiratory syndrome (SARS) outbreak, 2006’s avian flu (H5N1) and the 2009 swine flu (H1N1) epidemic.
In early 2003, the global economy was emerging from recession and wary of the invasion of Iraq. Despite this vulnerability, SARS “only briefly” added to the pressures on global stock markets, according to Kleintop.
Kleintop says the impact was felt most acutely in Asia, where the outbreak was most concentrated, and in airlines as travel declined.