Coronavirus Lesson #1 for Investors: Beware Predictions of Market Bottoms

With hoops “out” and exponentials “in” (referring to March Madness, the 2020 pandemic definition), there’s a new, customary disclaimer on economics and financial sites. Mine says that I, too, knew nothing about infectious disease modeling only two months ago. But I’m catching up, just like everyone else. By now, I might have reached a “Dummies Guide” standard, and I’ll keep this article at about that level.

So with that preface out of the way, I’ll first offer a health warning of sorts about a type of COVID-19 chart that’s popular with market bulls. Here’s a version that appeared in the New York Times:

And here’s a second version that uses the same axes but with different data:

The second chart bounced around Twitter and then appeared on at least one financial site—to support a breezy message that people should stop panicking and start preparing for a surprise melt-up in stocks.

And why do the charts need a health warning? The problem is the horizontal axis—showing a statistic that epidemiologists call R0—which is presented as though it’s the only information you need to have to understand how widely a disease spreads.