Global stockmarkets have rallied in the past few days shrugging off coronavirus fears.
On Wall Street, the Dow Jones index soared to a new record high last night, despite the fact there are no signs of the coronavirus spread easing yet.
The local NZX-50 bounced up 1.5 per cent this morning and has almost erased all the losses of the past two weeks.
Is this irrational exuberance? Why are investors so sure the crisis in China won't have a long term impact?
While the uncertainty still surrounding the coronavirus outbreak makes it impossible to rule out a financial crisis, history suggests epidemics don't cause markets to crash.
"In previous [outbreaks] we haven't seen markets dip too much ... they tend to be quite short-lived events," Pie Funds chief investment officer Mark Devcich said.
The most obvious comparisons were to Sars (Severe acute respiratory syndrome) back in 2003 and Mers (Middle East respiratory syndrome) in 2012.
Both of those were coronaviruses themselves and the outbreaks lasted a few months, Devcich said.
There were a number of deaths - although fewer than the latest coronavirus has caused - and many people fell ill.
But the actual economic impact was short lived and the impact on financial markets was even less.
Volatility in markets, especially in China, was to be expected, Devcich said.
Markets tended to bottom out when the outbreak was seen to have reached a peak in the number of news cases.
"So with Sars we can see, with hindsight, the market hit the bottom of its fall as cases hit their peak."
At the time the Hong Kong stockmarket fell as much as 10 per cent but the effect was much less severe elsewhere in the world.
In fact the MSCI Index - which aggregates global market performance - shows markets powered through Sars, up 21 per cent six months after the peak of the outbreak.
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There were clearly some important differences between now and 2003, Devcich said.
China's economy is much bigger and the world much more interconnected.
"There has been a lot of globalisation. The Chinese economy is around three times larger."
That has meant certain sectors are being hit harder than others.
Oil prices and copper prices - both barometers of economic growth - have slumped by as much as 20 per cent since the start of the outbreak.
"China consumes a lot of those commodities given how fast it is growing," Devcich said.
In New Zealand the immediate issues have been with tourism and fresh-food exports.
However, the latest global dairy auction has showed the outbreak is starting to affect soft-commodity prices.
It is possible the economic fallout will be much wider than the direct financial market impact.
The People's Bank Of China has already said it will inject $1.2 trillion Yuan ($265 billion) of liquidity into the financial system and cut short-term rates.
"They might have to do that again in a few weeks' time, depending on how economic growth is fairing," Devcich said.
"And around the rest of the world we've seen 10-year interest rates drop quite a bit in the past few weeks due to concerns about the impact falling Chinese GDP will have."
As the slowdown flows through the global economy it will start to put pressure on other central banks - including New Zealand's Reserve Bank - to make interest rates cuts that weren't otherwise needed.
That, ironically, would be good news for equity markets.
Low interest rates have driven a strong bull market for more than a decade now.
The length of bull run has prompted some fears that any external shock could be used as an excuse for a major sell-off.
"We're long in the tooth with this bull market and this economic cycle. Economic cycles don't normally last more than 10 years," Devcich said. "Potentially the market is looking for that catalyst or at the very least to take some profits."
But so far, outside of China, the market response is looking quite benign, he said.
Unlike the global financial crisis in 2008, when the markets had enormous structural issues, there was potential for quite a sharp rebound when the situation improved, he said.
"That's our base case. We'll have maybe one quarter of bad sales, especially for companies more exposed to China, and then we're probably on to the next news headline.
"People are closely watching the new cases number and when we see some moderation in those new case numbers, people will look at that and see that it is not out of control," he said.
"That will probably be the all clear and we'll be back to a risk-on environment."
- The Market Watch show is produced in association with Pie Funds