What would the S&P/ASX 200 Index (ASX: XJO) do if Aussies are ordered to stay home because of the coronavirus?
Italy is going through a very tough time. The UK just ordered a three-week lockdown. Germany is in lockdown too. New Zealand is apparently the next country that's going to enact a lockdown.
Australia was doing the same things as the UK before, so shouldn't be too surprising if there's a lockdown ordered here in the next couple of weeks.
What would the ASX 200 do if Australia is ordered into lockdown?
Including today's small rise, the ASX 200 is already down 35%. I don't think a lockdown would be a surprise for investors at all, considering what's occurring overseas. It's a distinct possibility. The market may even like a shift to a lockdown so that the country can get in control of the outbreak. Hopefully people take it seriously.
If Australia were to go into lockdown, it would hopefully lead to slower infection growth after a couple of weeks – it takes a while for the symptoms to show up. This would be better for the long-term, as long as people then stuck with the heightened awareness of the need for stopping the spread, washing hands and so on. This would hopefully mean life and the economy would get back to normal sooner.
But of course, there are plenty of individuals and businesses that don't have the financial foundations to go for a few weeks without income.
What would the ASX 200 do if the country goes into lockdown? Well, only time will tell.
But we can look at other countries.
The UK FTSE 250 went down 3.8% on Monday and it's down 40% since 21 February 2020.
The Italian FTSE MIB, which is 40 Italian shares, dropped 1% on Monday. On 11 March the country went into an enhanced lockdown with all non-essential businesses closed – since then the Italian index has dropped 13%. Since 21 February 2020 the index is down 37%.
Australia is already under a lot of restrictions with some schools closed and several states/territories having closed their borders unless people self-isolate for two weeks, though cargo is still travelling between states. We're in a similar position with a similar share market decline.
Foolish takeaway
I think the current and near-term bad news is already priced in, in terms of the virus and actions to stop its spread.
We can't know what the ASX 200 will do each time, particularly because it's just made up of a number of individual businesses. In terms of the effects of the coronavirus itself, I think we're near the bottom of the declines – it's been a heavy fall already!
If the economy can't restart quickly in the next few months then the financial problems could become more painful in the short-term, but I think these share prices look great for long-term buyers. Particularly with interest rates being so low.
