Ball State University issued the following announcement on Feb. 25.

Ball State University economist Michael Hicks believes U.S. stocks were poised to tank – even before worries of the coronavirus panic began to spread globally.

Stocks fell sharply February 24 as the Dow Jones Industrial Average losses reached 1,000 points.

“The world economy has been slowing for more than a year, and parts of Europe and Asia, including China were in, or at the cusp of a recession prior to the discovery of the Covid-19 disease,” said Hicks, director of Ball State’s Center for Business and Economic Research. “Stocks aren’t predictable, but the recent long growth of U.S. stocks are inconsistent with widespread economic slowing of the past year to 18 months.

“The dominant, short term economic effects of a global pandemic include lost productivity due to illness and death, and the costs associated with mitigating the spread and severity of the disease.”

Hicks points out that much of the mitigation costs are modest, such as face masks, hand washing, etc., but more aggressive efforts, such as suspending school, closing workplaces and limiting travel can be very costly. As is the case in China, significant supply chain disruptions are already enough to measurably slow the economy.

Though it varies by industry and firm, there are few manufactured products with a 120-day supply of inventory. Continued idling of Chinese factories will impact American factories and consumers in the next few week, he said.

“Americans are about to learn just how important global trade is to our standard of living, and vibrant economic growth,” Hicks said. “In the long run, the effects are dominated by loss of life and long-term morbidity effects, if patients do not make a full recovery. It is too early to judge whether or not this disease will have historically large long-term effects.”

Original source can be found here.