Don't worry, be happy. The melody of Bobby McFerrin's 1988 tune was pumping through my mind this morning as I watched S&P 500 futures hover in the green before the market's open.
The great thing about the Internet age is that news stories fill the same page as quotes on futures contracts. The juxtaposition of the green futures pricing and the bad news from the reddest of countries, China, is striking. The spread of the coronavirus is truly scary, and the actual human toll -- 26 dead as of this writing -- will likely pale in comparison to the economic toll taken by this pandemic.
Estimates of the exact size of the impacted population vary, but the Chinese government has now effectively quarantined at least 35 million people. China's travel ban expanded today to include Henan province as well as Hubei, in which virus epicenter Wuhan is located.
Those two provinces are largely rural, but the real downside to the Chinese economy would come if the quarantine area spreads east. Most are aware that China's explosive economic growth has been powered by the cities on the country's East Coast.
At this point, by my figuring, the quarantine zone is only 400 miles from the outskirts of Shanghai, China's commercial megalopolis which boasts a population of 23 million.
So, if Richmond, Virginia were experiencing an outbreak of a deadly virus, would folks in New York City, about 400 miles away, be panicking? Of course they would. Especially if that outbreak happened on the cusp of New Year's Eve, which is today in China owing to their use of the lunar calendar. New Year's and the accompanying Golden Week holiday are the biggest travel periods of the year in China, and the coronavirus outbreak effectively puts a kibosh on all those consumers -- and their yuan -- that would normally be circulating through the Chinese economy around the holidays.
Instead of throwing up my hands and shrieking at this market's ridiculous complacency in the face of a potential global health emergency, my new trading venture, Excelsior Capital Partners, gives me a way to trade it.
So what companies will be impacted the most if the coronavirus spreads to Shanghai?
Tesla (TSLA) and NIO (NIO) . Lost in Tesla shares' recent meteoric rise (NIO has had a very similar move) is that both companies need to make as many cars as possible in China to create cash flow. Selling them will be another matter, but at this point Elon Musk needs production at his Lingang factory to ramp as quickly as possible. NIO's cars are actually produced by state-controlled JAC Motors in Anhui, closer to the coronavirus epicenter, and any production shutdown would threaten that company's fragile balance sheet.
Be prepared for "China" to become a one-word palliative to ease investors' worries about weak guidance for corporate earnings in the March quarter. Smart investors see through that.