Thursday, February 27, 2020

Coronavirus Related Stock Losses in 2 days Equal to the Cost of Climate Adaptation for the Next 10 Years

Stock market losses associated with Coronavirus (COVID-19) equals the cost of climate adaption over the next decade.  Standard and Poor's 500 recorded a $1.7 trillion loss in two days of trading due to Coronavirus. This is roughly equivalent to the estimated cost of climate adaption until 2030. This according to a 2019 report from the Global Commission on Adaptation which is led by former UN Secretary-General Ban Ki-moon, World Bank chief executive Kristalina Georgieva and Microsoft co-founder Bill Gates as well as and 31 other world leaders.

The report indicated that investing $1.8 trillion in climate adaptation could yield benefits worth more than $7 trillion. This involves investments in warning systems, infrastructure, agriculture, mangroves, and water. They say these investments would provide a "triple dividend" that includes avoiding future losses, generating positive economic gains through innovation, and delivering social and environmental benefits. All together this dividend is valued at $7.1 trillion.

The stock market's multi-trillion dollar hit from the Coronavirus would more than cover the cost of climate adaptation for the next decade. As reported by CNBC, the S&P 500 alone lost an estimated $1.737 trillion in value in two days (February 24 and 25). That is the biggest loss for the S&P 500 in five years. The S&P is negative for the year as is the Nasdaq Composite and the Dow Jones Industrial Average. The Dow lost 1,000 points on Monday, 900 on Tuesday, 1,000 on Wednesday and almost 1,200 points on Thursday. This was the worst single day loss in the history of the Dow and the worst four day decline in a dozen years.

Despite U.S. President Donald Trump's assurances, the crisis is far from over, in fact, the pandemic is just beginning. Amid fears of supply chain disruptions blue chips like Apple and Nike are predicting lower earnings. Bond yields have plunged, the10-year US Treasury note fell to a record low and oil is also down below $47, a new 53-week low.  The American economy is expected to grow at an anemic 1.25 percent in the first half of this year and it could get far worse.  Concerns about the incompetence of the Trump administration are only adding to the economic uncertainty.

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