A Socionomic Insight - Coronavirus

I have recently published a chart of China and it has a lot of people jumping out of the seat questioning the thesis that the Chinese market has bottomed. More importantly this thinking is backed by recent experience in the form of bad economic data that has continued to come out of China and the missing impact of the most recent Coronavirus [nCov] outbreak in the region. They probably do not realize that their reaction comes from Hindsight bias.

This takes us to a completely different topic of the impact of social mood on Human Health. This is a tricky subject. We have already seen that bear market of large degree are followed by social unrest, civil war or outright war. These out breaks follow wave C of a cycle degree or higher bear market. The reason is that stock markets reflect social mood and a bear market of that magnitude reflects worsening social mood, and when people are negative then they are angry and more willing to fight back and war is one form of fighting back that occurs. Leadership may take advantage of this mentality and as proven by Hitler it can be taken the wrong way as well.

But there is also another study done by Bob Prechter during the 2000-2002 bear market that saw the first outbreaks of Fear regarding some form of disease or epidemic. The fears came in initially following actions by terrorists to use chemical weapons but in the years that followed we saw SARS, Swing Flu, Bird Flu etc, following the 2008 bear market. Robert Prechter conducted a study to show how negative social mood makes the human body more susceptible to attacks by such external forces. In short the deeper and more prolonged the economic crisis the more people are in depression that they become capable of catching such infections. That is when Pandemics at scale are possible. I further confirmed this with a family member and practitioner of public health. There are some virus and other micro-bodies that we all carry that can attempt an attack or become active when you are more susceptible. Today the world is not in a bear market of that magnitude yet as much as the risk has been perceived. However, China has been through years of a bear market if we go by the Shanghai index that has not performed for almost a decade.

If that is poor mood than maybe that reflect the extent of the crisis in China. That said this chart also shows how like wars these events of near Pandemics are late stage events from the point of view of financial markets. The poor performance of markets that precedes the event usually ensures that by the time the event matures the markets have seen their worst. For that reason you cannot panic on it now and need to take a contrary stance. Once authorities are willing to act and stop things from getting worse the panic phase is over. Yes it will take time for things to normalize and recover but that is not the trade. Now look at this chart from the just published Asian Pacific Financial Forecast from Elliott Wave International and you get the picture.