Monday 23 March 2020 by Stephen Mackie Trade opportunities

Lessons from the Swine Flu

I have been following the coronavirus outbreak since it first hit the news in January, and by following I mean I have been tracking daily case numbers and recovery rates to the point of boring my work colleagues. Being somewhat older than most of them, not only makes me a higher risk of contracting coronavirus, hence my interest, but has also given me insight into how things could pan out for markets during this period.


I have seen how both bond and equity markets can react to major events of the past 20 something years, including the Asian crisis of ‘98, Y2K (remember that one), 9/11, Iraq War, GFC, Swine Flu, 2011 Tsunami in Japan and more recently during my last stint in London during the European Debt Crisis. So whilst the market’s reaction to coronavirus is not unexpected, I, like many am astounded at the severity of the equity market sell-off. Having some insight into bond markets, I can’t profess to being either medically trained or really know what’s happening with equity markets, so I have put together some charts to try to make sense and provide a hypothetical guess of “when does the sell-off stop ?”

Coronavirus vs Swine Flu

The Swine Flu Pandemic of April 2009 originated in Mexico and rapidly spread globally, also being declared a global pandemic by the WHO as opposed to a local epidemic. According to a very well trained medical family member with significant experience in diseases, ie, way more idea than I do, coronavirus is more contagious than swine flu by more than 20% with some calling it upwards of 60% more contagious. Looking at the case numbers from swine flu compared to coronavirus, I have used the growth function in excel to extrapolate the future case numbers globally. So assuming the virus continues to spread as it has so far, the number of future cases follows a similar trajectory. Again these numbers are purely derived using the stat functions in excel, no scientific input has been involved in these estimates.

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Using similar functions on the death rate from coronavirus compared to the swine flu pandemic of 2009 demonstrates a much higher current and forecast mortality rate.

I think for someone with absolutely zero medical training aside from a few hours of CPR at a surf club 20 years ago, this chart explains the urgency of the response from governments (some anyway).

Combining the 2 numbers above we get the death rate or what is referred to as the Case Fatality Rate or CFR.

The CFR for swine flu averaged around 1% globally, however, the CFR for coronavirus(actual/forecast) is more like 3.7%. This is a lot higher than the 2% that was observed at the start of the outbreak.

So what does this mean for markets and why has the reaction in the stock market in particular been so acute. I put it down to 3 main reasons when comparing the Swine Flu Pandemic of 2009.

  1. As demonstrated above, swine flu was less contagious and less lethal than the coronavirus.
  2. Media, including social media, is considerably more prevalent with coverage of this current pandemic. I can’t even recall if Twitter was around in 2009. No point elaborating on this fact, just google toilet paper fights for further evidence.
  3. Market levels could not be more different between April 2009 and January 2020.

I will explore this final point in more detail.