Viruses eventually normalize but how long does it take? Painting shows an Italian hospital during the Spanish flu epidemic of 1918-19. Image: AFP / ©Costa/Leemage

Two uncertainties are rocking financial markets around the world. How long will it take for the new coronavirus to normalize? And what economic damage should we expect until then?

The garden variety influenza virus is an example of a particular type of coronavirus that has been normalized. The name comes from Renaissance Italians who attributed the sickness to the “influence of the stars.”

Humans around the world have been living with it for centuries, many have developed immunity, there are vaccines and the fatality rate is a low 0.1%.

That means the bug has been normalized. We live with it and pretty much ignore the fact that tens of thousands succumb to it each year.

So how long will it take for Covid 19 to become normalized?

Some epidemiologists speculate that if half the people around the world were to contact the virus and develop immunity, there would be enough herd immunity to virtually stop transmission.

A vaccine would be a much safer way to develop herd immunity but developing a Covid-19-specific vaccine could take 12 to 18 months., epidemiologists say

The World Health Organization estimates that Covid-19 now has a fatality rate of 3.2%. Fatality may be as high as 20% among the elderly and nearly zero among the young.  

So the fatality rate is 32 times that of the garden variety influenza that kills tens of thousands each year.  (Some note the rate may decline as more people are tested and the denominator rises.)

Assuming a vaccine is developed within 12 months and global herd immunity is reached in 18 months, what would be the economic cost of containment, and if that fails, mitigation?

Cost of containment would include everything from canceled flights, meetings, conventions and hotel reservations to reductions in work hours, production and household consumption expenditures. Picture empty stadiums, theaters, schools, malls and the consequent bankruptcies..

If containment fails, the total cost of the mitigation period – when authorities have recognized that the disease has escaped its bounds and is out there for anyone to catch and that about all they can do is to slow it down and minimize fatalities – may be several times the cost of the containment period.

The market value of all listed stocks around the world was around US$60 trillion near the end of January. In the past several weeks, that dropped by about US$9 trillion. 

By comparison, global income (GDP) is around US$37 trillion, according to the International Monetary Fund.  The market is signaling that Covid-19 could cost us about 24% of our income in the coming year or two. 

If so, this is a global recession.  

Whether the markets judge that this amount of discounting is too much or too little depends on how successful the nations are in containment. Without more confidence in containment measures, the markets are likely to remain weak.