Mexico is in a panic over swine flu, and other countries may not be far behind. What will this mean for stocks? Even though fewer than 2,000 people have been identified as swine flu victims so far, the panic is beginning to affect world commerce.
That's not good news for stocks.
If some leading stocks fall on the news, most or all stocks probably will follow, regardless of how strong they've been technically or fundamentally.
In Mexico, restaurants, movie theaters and churches are closing, hotels are anticipating reservation cancellations and in Mexico City, at least, most people are staying home. Retailers are hurting.
Around the world, airlines and airports are gearing up to screen passengers for flu-like symptoms. Flight cancellations may not be far behind if the flu spreads and panic swells. It wouldn't take much more of a slowdown in commerce to undermine energy and other commodity prices.
What are traders to do?
Buy long-term puts that expire in, say, December or January, as a hedge. If stock prices fall, most puts prices will rise as volatility rises.
Buy the stocks of hospital and nursing home companies, home health and hospice companies and ambulance operators. Funeral home operators may see their profits rise. Some medical supply and pharmaceutical companies may benefit, but they also could be hurt if hospitals' beds are filled with patients who don't need their products.
Sell stocks, or hold on if you think this, too, will pass quickly.
A swine flu panic and epidemic would be one of those unexpected and unpredicted events known as "Black Swans". While a worldwide epidemic has been feared forever, the timing has been totally unpredictable. And the magnitude of the problem won't be known for awhile.
Meanwhile, wash hands frequently.
Don't panic.
Don't breathe.
Update link. Asian shares mostly lower; swine flu, US futures. MarketWatch.
