Covid-19 will reshape economic thinking, create big buying opportunity

TWO months ago, when people were still referring to Covid-19 as "the China virus", global markets seemed ambivalent about the depth and duration of any economic slump that lay ahead. The initial sell-off in stocks was shallow and short-lived, though the US dollar was quietly strengthening.

Now, we are getting a taste of how ugly things could look when companies begin reporting their Q1 2020 numbers. This past week, the Caixin/Markit composite manufacturing and services purchasing managers' index (PMI) for February came in at a record low of 27.5, down from 51.9 in January. Readings above 50 indicate growth, while those below 50 indicate contraction.

It is also becoming clear that Covid-19 is as capable of causing irrational panic in the West as in the East, with reports in recent days of shoppers in the US and UK flocking to supermarkets to stock up on food, bottled water and, yes, even toilet paper.