It was only a few months ago that I was writing economic and market commentary at Seeking Alpha that said things are fine. The overall backdrop has changed drastically since then due to the global pandemic. Consider the following negative developments:
- The last two weeks of initial unemployment claims printed their two highest readings in history;
- Friday’s employment report printed a drop of slightly more than 700,000 jobs lost;
- the latest Markit Economics PMI data cratered.
This is just the beginning of what will be a spate of truly terrible economic data.
However, there are several key reasons to be hopeful right now.
Let’s start with this: the global policy response has been appropriately large. The US recently passed a $2 trillion bill to limit the damage while the Federal Reserve has back-stopped the credit markets (which is already having a positive result). There is already talk of a second US stimulus package (as an aside, we should all thank Speaker Pelosi for her efforts here). We’re seeing the same kind of response globally. Central banks are lowering rates and providing liquidity to the credit markets; governments are pledging hundreds of billions of dollars to mitigate the damage. These program responses are simple, macroeconomic 101.
Then there’s this: the entire global medical community is focused on solving this issue. All across the globe, people are working to solve this problem; it’s not confined to a single lab or university. It’s everybody. The WHO has started a global “megatrial” of potential options. I’ve read about others but can’t find the links. Yes, it is definitely a race against time. But there is a tremendous amount of brilliant brainpower looking at this. I have faith that somebody or sombodies will announce, “we’ve got and answer.”
Business will adapt to the new environment quickly. Never underestimate the ability of business to find solutions. Don’t believe me? Consider the US manufacturing sector during the US-China trade war. It continued to find workarounds to the problem caused by large tariffs. Some moved overseas operations to other countries like Vietnam; others brought capacity closer to home. But when challenged, they solved the problem. Expect the same thing now. What will the new business landscape look like? I have no idea. But there will be people who will figure out a solution.
Finally, the public has seen that Republicans can’t govern while Democrats can. The Republican cast of characters has done everything they can to demonize government; to downsize the services it provides; to denigrate government employees as worthless. As a result, they have hampered the federal response to badly that people will die. But the problem runs deeper. Southern State governors have kept their states open far too long, allowing the virus to spread. Right now Florida is more than likely the next hotspot. I wouldn’t be surprised to see Alabama and Mississippi the next most likely places. Citizens will die due to mismanagement before and during their crisis.
Compare that to NY Governor Cuomo. His daily press conferences are great: he’s direct and honest. He relies on scientists and the data to make decisions. As a result, his approval ratings are skyrocketed. Why? Because he’s honest and straightforward. There is no comparison between his delivery and Trump’s. Simply put, Cuomo is believable while Trump is not.
I’m not trying to downplay the severity of this situation; this is definitely a life and world changing development. But I also have faith that we will solve it, get through it, and then adapt to the new world order.