How to Invest as America Battles the COVID-19 Chaos

“There’s a chance that it won’t spread, too, and there’s a chance that it will … It could be at a very small level or it could be at a larger level.” — President Trump, talking about the COVID-19 coronavirus.

In other words … we don’t really know how all this will play out.

But one thing is for sure: The fear of the disease is worse than the disease itself. And it’s important not to let fear get the better of us … or our portfolios.

In light of all the frightening news surrounding the outbreak — both real and fake — Dr. Martin Weiss released an urgent 10-minute video about the true impact COVID-19 could have on your investments and what you should do about it. If you haven’t seen it yet, I highly recommend you watch it now.

It can be hard to see the forest for the trees. Doubly so when the media and the markets are adding to an overall sense of fear. But if you put away that fear and take a look at the big picture, you can better prepare for any outcome.

The interruptions to international trade are dragging on the global economy. The Organization for Economic Cooperation and Development says the impact could cut global GDP growth in half this year, to 1.5%. That would be a big drop from the 2.9% growth seen in 2019.

The United States saw its first two deaths from the coronavirus over the weekend. States from coast to coast reported new infections leading to a drastic spike in the total number of cases.

On Friday, there were 65 cases and no known deaths in the U.S. Less than 48 hours later, a hospital in Washington State reported two deaths, the makings of a cluster. And the total number of cases nationwide jumped 35% to 88.

So far, COVID-19 seems to be deadlier than the flu, which kills about 0.1 percent of people who become infected. Early estimates of the death rate for the coronavirus outbreak’s epicenter in Wuhan, China, are around 2%.

That rate could fall if it turns out many cases aren’t detected because they are so mild … even symptom-free.

Let’s make some flu comparisons for a bit:

The CDC says 9% of the U.S. will get the flu in 2019-2020. COVID-19 seems to be more contagious, but let’s say we’re lucky. If the infection rate is the same as the flu, that means 29 million people will become infected. Most people who become infected WON’T feel the need (or financial ability) to go to the hospital. If 5% of those potentially infected go to the hospital, that’s 1.5 million hospital beds.

U.S. hospitals routinely operate at or near full capacity. Their ability to rapidly increase services is very limited.

Maybe the infection rate will be LESS than the flu. Again, we might get lucky.

As with influenza, the COVID-19 coronavirus is most dangerous to people over age 65, or who have chronic illness or a weak immune system.

So far in the current season, there have been 32 million cases of flu in the U.S., with several hundred thousand hospitalizations and 18,000 deaths. There have only been 88 confirmed COVID-19 cases found in the U.S. so far, with two deaths.

COVID-19 was first detected in December in Wuhan, China. Since then, it has sickened more than 89,000 people and killed more than 3,000 worldwide. Most cases and deaths have taken place in China. However, a sharp uptick in the number of cases and deaths was reported in Iran, Italy and South Korea last week.



On Wednesday, the first case appeared in South America after a 61-year-old man flew to Brazil from Italy.

“This epidemic has exploded much more than SARS did,” David Ho said during a forum on COVID-19. Ho directs the Aaron Diamond AIDS Research Center and is a professor of medicine at Columbia University.

But he cautions against hysteria. Experts say the mortality rate of COVID-19 is around 1%-2%. That means for every 100 people infected, 98-99 of them will survive.

To be sure, COVID-19 is deadlier than seasonal flu … by 10-20 times. But SARS — another coronavirus that caused a panic in 2003 and 2004 — is three to four times deadlier than COVID-19.

The outbreak worsened quickly last month, roiling financial markets as investors fled risk assets amidst concerns over disruption to the global economy.

In response, U.S. lawmakers are seeking to provide between $6 billion and $8 billion in emergency funding to fight the COVID-19 epidemic.

Meanwhile, biotech companies are ramping up drug and vaccine programs to fight the disease … causing investors to bid up their shares in the midst of the worst market rout since 2008.

But analysts caution that any commercial treatment — especially vaccines — could be years away.

Diagnostics

All this raises questions about U.S. preparedness for the potential spread of the virus … including the nation’s ability to accurately and quickly test people for both diagnosis and surveillance purposes.

One reason the spread of the disease in the U.S. is hard to track is due to a lack of testing kits. The kits sent out by the Centers for Disease Control (CDC) were flawed. New kits are being issued, but the delay fueled fear.

According to the CDC, the U.S. has tested just 459 people for COVID-19. In comparison, Guangdong, China, has tested 320,000 samples and South Korea has tested more than 66,000.

The medical community is, however, quickly rallying to develop rapid and reliable diagnostic testing kits for the new coronavirus … following a breakneck effort to identify and sequence the virus’ genome.

Impressive progress has been made in just weeks. In contrast, it took almost six months to establish assays for the 2002–2003 SARS coronavirus.

One U.S.-based firm in particular is being noticed by investors …

Shares of Co-Diagnostics Inc. (NASDAQ: CODX) rose 57% on Thursday, bringing its February gains to 333%. Investors were pleased when the company received a CE Mark — or certification mark — indicating the test is compliant with health and safety standards that allow it to be sold in Europe.

The stock has been on a tear ever since it came up with its test, which it is currently selling for research use.

Thursday’s spike came even after Co-Diagnostics said it has completed a $4.2 million registered direct offering (new shares offered to the public) priced at-the-market.

The company has been taking advantage of the virus-driven rally in its stock to issue new shares, although a stock normally falls when it does dilutive financings like this.

Maxim analyst Jason McCarthy said Wednesday that Co-Diagnostic’s test is easier to use than the one used by the CDC. Maxim rates the stock a buy … even after gaining a stunning 1,401% year-to-date.

A number of other companies are developing COVID-19 tests, including publicly traded firms Thermo Fisher Scientific (NYSE: TMO) in the U.S., Novacyte (OTC: NVYTF) in the U.K., Roche of Switzerland (OTC: RHHBY) and Qiagen (NYSE: QGEN) based in Germany.

Private and foreign exchange-traded companies in the U.S., China and Germany are also working on their own diagnostic assays.

Next week we’ll look at companies developing treatment options for COVID-19.

All the best,

Sean

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