A black swan event is a term used on Wall Street that refers to a rare and unpredictable occurrence that is beyond what is expected and has severe consequences. It’s derived from European explorers who had previously thought that all swans were white and only white, as that was all they knew. They were overcome with shock and confusion when Dutch explorer Willem de Vlamingh discovered the existence of black swans in Australia.
The coronavirus is a black swan event, which may have serious consequences for your job, the stock market and global economy.
The United States economy has been strong with record-setting high levels of employment. The stock market has rebounded incredibly since the financial crisis, increasing the net worth of many Americans.
Historically, when the stock market goes relatively straight up, there is an expectation of a correction somewhere down the road. A correction is about a 5 to 10% drop in value of stocks. It’s viewed as necessary, like clearing out the dead brush in a forest to prevent a future fire. Even the wisest minds on Wall Street admit that they can’t anticipate where the next correction will come from and what damage it may bring. It now seems that the coronavirus is that black swan event.
The coronavirus is a large family of viruses, which include severe acute respiratory syndrome. An outbreak of a new coronavirus that began in Wuhan, a city in China with roughly 11 million people, and has already contributed to the deaths of at least 81 people in China. The virus has spread throughout China and other countries, including Thailand, Hong Kong, the U.S., Taiwan, Australia, Macau, Singapore, Japan, South Korea, Malaysia, France, Canada, Vietnam and Nepal. It’s estimated that about 3,000 people have contracted the virus so far.
China has enacted measures to limit the movement of its people. This is especially challenging since the virus started around the Chinese Lunar New Year, which is known as the country’s biggest travel period. The government has quarantined more than 50 million people. This hasn’t completely stopped people from evacuating. The mayor of Wuhan said that 5 million people have already left the city. He also admitted that the city did not release information about the virus and suggested that it was suppressed by government authorities. The health minister of China said the coronavirus is increasing in its virulence. People can be contagious before they even exhibit symptoms. This is dangerous, as it makes people appear healthy when they’re not.