Moody’s Analytics: Deadly Coronavirus May Be Black Swan Event Like No Other

Moody’s Analytics: Deadly Coronavirus May Be Black Swan Event Like No Other

A man walks by an electronic stock board of a securities firm in Tokyo, Wednesday, Dec. 18, 2019. Asian shares were mostly higher Wednesday after record highs on Wall Street amid investor optimism about an interim U.S.-China trade deal announced last week. (AP Photo/Koji Sasahara)

A black swan is a rare and unpredictable event with potentially severe consequences and is characterized by claims, after the fact, that it should have been predicted. Black swan events can cause catastrophic damage to an economy, and can only be prepared for by building robust systems, according to a definition by Investopedia.

A coronavirus pandemic would be even more of a “black swan” than the global financial crisis and Great Recession of 2008-2009, according to Moody’s Analytics. Unlike the U.S. home mortgage meltdown, no one predicted the early 2020 arrival of a potentially devastating pandemic. And unlike the financial crisis, public-health and economic policymakers may be limited regarding their ability to remedy or offset a 1918 (or Spanish flu) type pandemic.

“Moody’s Analytics’ industrial metals price index has plunged in response to the risks posed by the possible spread of the coronavirus. To a considerable degree, the latest bout of industrial metals price deflation stems from China’s outsized influence on global industrial activity .

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“Panic is growing, and adverse economic implications are rising as the number of confirmed cases of coronavirus in China and abroad continues to rise. While there is usually a bounce-back in economic activity after containment of a health epidemic, this latest outbreak hasn’t reached that point. Most of the cases are in China, but Hong Kong, Australia, the U.S., Canada, Taiwan and South Korea are amongst those with infected patients,” according to Moody’s.

“The industrial metals price index plunged by 7.1 percent since the arrival of coronavirus risks. A removal of the coronavirus threat offers no assurance of a quick return by industrial commodity prices to their highs of 2018.”