Be worried about the right things with COVID-19

Living in Tokyo and having connections worldwide during the Coronavirus outbreak has shown me that nervous energy has been put to good use in some parts of the world, but it’s created surprising hysteria in others.

The Coronavirus, now officially COVID-19, is first and foremost a human health crisis. A worldwide crisis of this nature has, rightly, mobilised global authorities and mandated strict measures for highly affected countries, and the nature of communication and travel in a global society as we know it.

My experience living in Tokyo and working with AMP Capital’s offices in Beijing and Hong Kong have shown me the power of a mobilised, cooperative collective in containing the spread of the virus and protecting communities. I certainty feel a sense of caution on the streets of Tokyo, but it’s matched by a sense of control and process.

Interestingly though, there are bouts of panic in parts of the world which is disproportionate to the impact of the virus¹. For example, in Australia, there are shortages in supermarkets nationwide of essential goods like toilet paper², as shoppers fear restricted supply. This is despite Australia being largely self-sufficient in manufacturing toilet paper, meaning supply patterns could return to normal if buying patterns moved back to a needs basis³.

In situations of this gravity, when panic starts to have a material impact, I draw parallels with a warning to investors from Warren Buffet, in his 1986 letter to shareholders⁴, where he spoke of the unexpected and unpredictable impacts of fear spikes.

“What we do know… is that occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. And the market aberrations produced by them will be equally unpredictable, both as to duration and degree.”

As the Coronavirus outbreak continues, and containment measures are deployed worldwide, it becomes essential to focus on the actions we need to take – as investors and as private citizens – and be vigilant of the behaviour that is being driven by fear alone.

History tells us epidemics, pandemics and all manner of human emergencies and market crashes have an eventual recovery. History also teaches us how to repeat success and a universal learning – tried, tested, quoted and heralded – is that fear skews vision and behaviour.

We have an important period of containment and recovery ahead of us, and I have the utmost confidence this will be achieved. I’m buoyed in particular by the containment measures in China now reaping results, and my personal experience with an effective, cohesive and collective effort across the Asia Pacific region to follow advice and work towards the greater good of community protection. These are behaviours that are human-made, and therefore, manageable ways to replicate progress.
 

¹ https://www.health.gov.au/news/health-alerts/novel-coronavirus-2019-ncov-health-alert
² https://www.aljazeera.com/news/2020/03/australians-scrap-toilet-rolls-coronavirus-panic-buying-200308014116516.html
³ https://www.afr.com/companies/retail/panic-toilet-paper-buying-pointless-say-experts-20200306-p547gd
⁴ https://www.berkshirehathaway.com/letters/1986.html