Displaying items by tag: shutdown
The Shutdown Could Be Good for Economic Growth
(New York)
All the predictions in the market are about how steep the recession in Q2 will be (we think people should also be considering the Q1 numbers!), but a new paper has been published looking back at the economic effects of the 1918 pandemic. The surprising finding is that strong shutdowns did not actually hurt the economy as much as thought. In fact, the areas that undertook the strongest and swiftest shutdowns, had the weakest drops in output and the quickest recoveries. The average US location suffered an 18% downturn from the pandemic. However, the researchers (two from the Fed, one from MIT) summed up their findings this way, saying “Cities that implemented more rapid and forceful non-pharmaceutical health interventions do not experience worse downturns … In contrast, evidence on manufacturing activity and bank assets suggests that the economy performed better in areas with more aggressive NPIs after the pandemic”.
FINSUM: While this is not the most compelling evidence (given it is 100 years old), it is encouraging to consider that those taking swift action might not see the worst consequences.
There is a Lot to Worry About, But Markets Look Good
(New York)
Markets are doing well this year, but there is a lot for investors to worry about. Aside from the current ongoing shutdown, there is a debt ceiling deadline on March 1st (which is sure to be another political nightmare, and may yet intersect with the shutdown), a deadline for a Chinese trade deal, and a scheduled Brexit on March 29th. That is a lot of potential crises on the calendar. However, valuations have fallen considerably alongside share price falls and P/E declines, and the market seems to be regaining its optimistic footing. Corporate earnings look to stay strong in 2019, which will help support the market.
FINSUM: There are a lot of analysts who think this is a bear market bounce, and many others who think the worst is behind us. We are starting to side with the optimists.
Here is What Will Shock the Market This Year
(New York)
The market will inevitably be shocked by some big news this year. Trying to forecast such news always seems like a futile exercise, but Barron’s has gone out on a limb and tried to select what will rock markets in 2018. There a three big calls being made. The first is a US government shutdown on the back of political in-fighting. That might cause a dip, but not a lasting one. The other two could be different. For instance, a looming trade war with China or other major trading partners could cause serious market issues. Additionally, there may be indictments of Trump’s closest family members, including Donald Trump Jr. and Jared Kushner, according to Barron’s.
FINSUM: Indictments of Trump’s family would rock Washington and the national psyche to its core. But it is hard to say that it would have a lasting effect on markets other than to create political uncertainty.