The coronavirus outbreak is triggering an economic recession far deeper than the one that followed the 2008 banking crash. Chunks of the money mountains are breaking off and sliding into an abyss.
While we struggle to get used to the lockdown, worrying about friends, family and vulnerable people in our communities, the flesh-eating hyenas who control the world economy are struggling to protect their fortunes.
Here is a quick summary of the way it looks today in the Financial Times. (I’ve included links to the articles, although many are behind paywalls – sorry for that!)
Forecasts of economic recession. Macquarie bank, in a note to investors, said:
The global economy is in deep recession. […] Quantifying the magnitude of the near-term hit with any certainty is not possible [but] the partial data to February show that the hit to China is without precedent.
Macquarie’s models suggest that the Chinese economy probably fell by 20% (seasonally adjusted annual rate or SAAR) in the first quarter of the year, and that the rest of the
world economy will sink by 15% SAAR in the second quarter – that is, “the worst quarterly contraction in the modern era”, compared to “the weakest quarter during the Great Recession” of about minus 9% SAAR.
The shock in the second quarter is likely to be broadly spread across the major advanced economies, with differences likely drive by the respective stimulus packages and government approaches to containment.
Another note, from Morgan Stanley, focuses on how its clients can profit from the recovery, once it starts:
While it’s not possible to call an absolute bottom with precision, we think it’s close on many metrics. […] Aggressive monetary and fiscal policy measures, degrossing to date, and optimism about the impact of social distancing have us leaning more positive. Even in the worst possible outcome – a depression – there is historical precedent (1930) to think we can rally sharply from the recent downturn.
In the US, for the second quarter of the year, Morgan Stanley forecasts a 30% drop in Gross Domestic Product (GDP); Goldman Sachs reckons it will be 24%.