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A Viral Market Meltdown Part II: Clues In The Debris

Aswath Damodaran profile picture
Aswath Damodaran


  • Over the last three weeks, we have had a glimpse of how quickly market moods can shift.
  • The big concern, if you are an investor focused on value, is not how much the coronavirus will affect earnings this year, but how much of that earnings drop is permanent.
  • At times like these, I am reminded again of the fragility of life and the importance of good health and family.

Update on 3/9/20: In a sign of how volatile times are, over the weekend, oil prices plummeted to close to $30, the treasury bond rate to less than 0.4% and the market looks set to drop substantially. A work in progress indeed....

I wrote a post on how the coronavirus was playing out in markets on February 26, two days into the market going into convulsions, and while I tried to make an assessment of the value effect, I also said that this analysis was a work in progress, that I would revisit as we learned more about the virus and its economic consequences. Eleven days later, we still don't have clarity on the health or economic effects of the virus, but we do have substantially more data on what the market reaction has been. In this post, I will begin by doing a quick update on the viral spread across the world, but spend more time on the market damage, looking at where it has been greatest, seeking clues for the future.

A Virus Update

In the last week and a half, the virus has clearly expanded its global footprint, with Italy and South Korea now in the front lines, in terms of exposure, but with the numbers climbing rapidly across the rest of the world, it is clearly now on its way to becoming a global pandemic.

NY Times, as of March 6, 2020

While the word "pandemic" alone is often enough to drive us to panic, it is not the first, nor will it be the last, and it helps to gain perspective to compare it to pandemics in the past, both in terms of contagion and health consequences. This chart from the New York Times reflects what we know about the virus as of February 28, 2020:

This article was written by

Aswath Damodaran profile picture
I teach corporate finance and valuation at the Stern School of Business at New York University. I am a teacher first, who also happens to love untangling the puzzles of corporate finance and valuation, and writing about my experiences. As a result, I happen to be at the intersection of three businesses, education, publishing and financial services, that are all big, inefficiently run and deserve to be disrupted. I may not have the power to change the status quo in any of these businesses, but I can stir the pot. Please note that the article that you are reading here was originally written on my blog and is republished in Seeking Alpha and other forums. Consequently, I neither track nor respond to comments here. I am sorry!   ==Editors' Note: Seeking Alpha monitors Dr. Damodaran blog and posts relevant articles on his behalf.

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Comments (4)

Eccellent! thank you.
Brilliant both intellectually and the ethics!
Really well written and good reference guide in the coming days/weeks/months - thank you!
biotech_gal profile picture
You've written another great article. Thank you
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

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