How will COVID-19 end? Scenario #1 | Pandemics & Stock Markets

How will COVID-19 end? This video helps us understand one scenario wherein Coronavirus will end if the present strict measures are taken and continued which will contain COVID19. We analyse it with reference to SARS which was similar to the Coronavirus and we faced similar threats when it happened back then. Based on this video, we will be able to understand the impact on financial markets. The first scenario is strict measures are taken which will contain the coronavirus. There is one analogy in our history which is SARS. SARS was of a similar nature and it started in southern China in 2002. It was brought under control by the measures which we are seeing around us, which is through isolation, quarantine and contact tracing. In this 8,500 people were impacted and there is currently no vaccine for this but because they were able to contain this through social distancing. The number of new infections was flattened out and the number of deaths eventually also reduced. In the early days, this was pretty scary as now it is for coronavirus and the death rate was also very high. But, the SARS Falls a strong differentiation because we were able to easily identify in those days the people who are impacted by SARS but for coronavirus, it is like in some of the research reports people with no symptoms are also impacted by Coronavirus. It will be slightly trickier, but this measure can still be applicable to coronavirus. So, if we believe this is what will happen, then these are the number of cases which are increased like cumulative count of that along with the number of days. Eg. the US took 24 days to reach 100,000 counts and similarly for other countries. What we have to do is to make this exponential rising curve a flat curve. South Korea did so they actually made it quite flat and a similar thing was done in SARS. In the chart from Wikipedia, the orange line indicates the cumulative cases which we have which is the same line which we see in this chart and number of cases for initially rising right from April to May but because of social distancing and other measures, the number of the incremental case started reducing and which is made in this S order logistic curve and the death rate actually followed this orange curve and it also flattened out. If you believe SARS is a good analogy of what will happen with Coronavirus then these are the timelines which we will work out with. How have the financial markets played out during the SARS period? This is the same daily percentage change of the four instruments which we are working with which are crude, S&P 500, gold and 20 years US Treasury bonds. Since this was pretty much a disease epidemic which was in China so we see less impact on financial markets. Nevertheless, the red line indicates there was a possible health emergency which was announced. Around that there are some just shocks or moments up and down or increase in volatility which. The chart makes it very clear. The crude actually fell quite a lot during this period but SB500 which is this orange line was relatively less impacted of what we see in this coronavirus times and same is this US Treasury. Again, the drawdowns were bad. For S&P it was around 15% during that period and crude was almost 30% but gold was in mid-teens and US Treasury was also down around 5% but this was managed very well by containing. So, there was no significant fall as we see right now. If we just do the same correlation analysis and in this everything is negatively correlated with S&P500. Again this won't be the right data bunch to work with because this epidemic happened in China so better metrics would be to compare it with the Shanghai index. But nevertheless, we are seeing a very high negative correlation between the S&P and the Treasury bonds, gold and crude oil in this period of time. How do all the things pan out after the crisis is over? Which sectors will be impacted the most? How the performance of the sector will be after the crisis is over? Answers to these questions and more, in the video! ----------------------------------------- This is a clip from our recently held webinar on 'How Pandemics Impact the Financial Markets - A Quantitative Analysis'. Complete webinar video recording:    • How Pandemics Impact the Financial Markets...   Slideshare and Codes: https://blog.quantinsti.com/pandemics... ----------------------------------------- Useful links: Join EPAT – Executive Programme in Algorithmic Trading: https://goo.gl/3Oyf2B Visit us at https://www.quantinsti.com/ ----------------------------------------- Link to our Blog: https://blog.quantinsti.com/ Like us on Facebook @   / quantinsti   Follow us on Twitter @   / quantinsti   Follow us on LinkedIn @   / quantinsti   Follow us on Instagram @   / quantinstian   E-mail us @ [email protected] -----------------------------------------