What Happened this Past Week?
From BNO: Coronavirus timeline: – January 19: 100 cases – January 24: 1,000 cases – January 28: 5,000 cases – February 12: 50,000 cases – March 6: 100,000 cases – March 14: 150,000 cases – March 18: 200,000 cases – March 19: 225,000 cases – March 20: 250,000 cases
From 100 total cases to 275,000 total cases worldwide.
Italy overtook China with more COVID-19 deaths (total of 4,092). Spain is now at a total of 1,000 deaths with at least 20,000 infected. France has 12, 612 cases with over Brazil has at least 900 cases with 11 dead. The United Kingdom has close to 4,000 cases with 177 dead. India reported a few cases and is implementing social distancing procedures.
The United States started taking the situation much more seriously and several states (California, Illinois, etc) are now under different phases of social distancing. Also, oil took a deep dive with Russia and Saudi Arabia pumping excess oil to little demand (taking down heavily indebted oil stocks with it).
That’s the bad news. What’s the good news?
That’s right monetary stimulus or helicopter money. This is where CB’s that is central banks lowers interest rates, conducts QE, and expands the monetary base.
Governments are coordinating to keep the economy going even during literal economic standstills. The United States has introduced measures such as considering payroll tax deferment, putting money in people’s pockets by mailing them checks, Andrew Yang style, but a one time deal. You don’t have to file your taxes until July 15, according to Mnuchin. Mortgage payments? Forget about it. Not in this economy. Homeowners with mortgages may see temporary rent forgiveness due to this situation.
There’s the stimulus for households, the people out on unemployment, the banks, and for the corporations. Airlines, cruiseships, maybe real estate, casinos, and the movie industry.
Everyone is seeing a massive decline in present earnings and future earnings due to lockdowns, lack of travel and general social distancing to slow down the virus. Small businesses and local communities everywhere are feeling the pinch as everyone seeks to shelter in place.
The coronavirus caused investors to sell stocks and assets to liquidate and cover their positions. People are running into cash, dollars, gold, and bitcoin.
The Dow, the S&P, and the Russell Index, are slumped and no one’s happy…except for those that can buy financial instruments at a more affordable price than before. That too, if they have the money.
What a time to be alive.
Now, I know this is supposed to be good news. But its a mixed bag. There’s support, but how much support? Experts note that it is not like we got out pain free out of the great financial crisis in 2008 or 2009.
The stock market boomed but did we see a strong economy? That’s debatable. Iterations such as the gig economy are hotly debated movements that may not contribute to holistic household strength.
So, here we are, spending time with loved ones, learning about Zoom and trying to stop touching our faces. Some of us continue to text financial representatives and ask if now is the right time to buy more stocks and if so, which one’s to buy.
Stocks and Assets
Oh, when it comes to stocks, here’s the middle ground, in my opinion.
More expect a recovery in 18-24 months. Further, the dollar should continue to rise amidst the coronavirus quantitative easing measures that take place by other CB’s around the world. Remember that Europe already volatility with revolutions in France, Spain, and Brexit, among large debt problems.
Finally, we notice large tranches of negative yielding debt in Europe. In such a scenario, more value must find its way to dollars. While the dollar itself will decrease in value due to inflation, it is still a safer bet due to dollar denominated debt, commodities, and debt servicing. The dollar and inflation hedge assets is the best bet that there is out there today.
Learning and Growing Opportunity
Social distancing can pave