Stock markets plummeted yesterday as the coronavirus crisis appears to get worse. Many people still don’t trust that the Chinese government is being completely truthful in the number of cases that exist in the country. And while the quarantine in Wuhan was lifted at one point, it was quickly put back in place as the number of cases rose. While the World Health Organization has claimed that the virus has peaked in China, no one really believes that.
South Korea is now seeing a spike in cases, due to a case of super-spreading at a church. Italy has surprisingly become a hot spot too, with over 200 cases reported in northern Italy. And Iran is facing its own outbreak in the city of Qom. All in all, the coronavirus is far from running its course, with the worst yet to come in the West.
That uncertainty surrounding the future of the coronavirus is one of the reasons that stock markets lost so much yesterday. The Dow Jones ended the day down over 1,000 points, an absolute bloodbath to start the week. The other reason markets are worrying is because so much of the global economy is dependent on Asian production, and quarantines in Asia will affect commerce throughout the world.
Factories in China are at half production at best, and global supply chains will soon be stressed to the point of breaking. Of course, even if China’s production is able to get back up off the ground, it wouldn’t mean much if the virus were to spread in the West, because then Western production would be shuttered in an attempt to forestall the virus’ spread.
With so many businesses being forced into slowing or shutting down production, the effects on the world economy can’t be underestimated. It could be months before production is back to normal, and the knock-on effects will be tremendous. This coronavirus crisis could very well be the impetus that starts the next world financial crisis.