3 unknowns that will determine the severity of the COVID-19 downturn

During the first of our fortnightly portfolio and market updates focussing on the investment implications of the spread of COVID-19, Jacob Mitchell outlines three unknowns which Antipodes believes will ultimately determine the severity of the developing economic downturn.

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Episode 1 Part 1 – Transcript:

Jacob Mitchell:

What are the sort of unknowns, in terms of the treatment and flattening the infection curve as we’ve all become experts of COVID-19?

There’s potentially positives and negatives out there and it’s really hard to know at this stage because treatments like hydroxychloroquine and azithromycin – we’re not sure of the effectiveness of some of these treatments. In the case of hydroxychloroquine, it’s an antimalarial, there has been some preliminary tests which seem to indicate that it cuts the length of the hospital stay and obviously in terms of taking pressure off of healthcare and hospital facilities that would be a bit of a game-changer. 

Secondly, correlation to colder climates: 80% of infections today are really found in parts of the world that were averaging temperatures below 10 degrees Celsius through November, December and into January. Now, once again maybe that is simply the fact that that’s where infections started and a lot of the warmer parts of the world, where we have significant population, in terms of continents – Africa, countries – India, we haven’t done a lot of testing. So there may be a bias in that sample. But if there is a correlation to colder climates, as the northern hemisphere starts to warm up, some of the pressure on the spread should start to lessen.

Thirdly, we don’t know at this stage to what extent there is an emerging herd immunity. I would expect to see a lot more discussion around testing people who don’t have symptoms to see whether or not they’ve already had an infection and they’ve developed immunity.

So as the information on all three of those starts to emerge, we will get a sense of how long the lockdown on economies needs to be. Clearly the shorter the economic lockdown, the less disruptive and less severe the ultimate recession will be.

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28 March 2020