Displaying items by tag: recession

(New York)

This is a dark day economically. New data is flowing in from many sources, and all of it is pointing to a severe decline in demand that seems ever more likely to push the US into a depression. Unemployment claims came in at another 6.6m this morning, meaning a total of 16.6m Americans have applied in the last three weeks. In other data, fuel and energy demand has fallen so far that it is now at 1960s level. Electricity usage has plummeted on the back of the sharp decline in industrial output.

FINSUM: Let’s do some rough calculations. The US workforce is about 164m people. We started this coronavirus lockdown with just under 4% unemployment, and have since added 16.6m people. By a rough calculation that means we likely have already hit 14% unemployment.

(New York)

One of the small but important pillars of the recent years of the bull market has been Millennials beginning to invest. However, as this coronavirus meltdown has unfolded, that growing support for the market may evaporate. Millennials mostly invest in the market via retirement plans, such as 401(k)s, but given the huge layoffs occurring, they are likely to have to raid their retirement funds in order to get through these hard times. Because of this there is likely to be billions withdrawn from the market.

FINSUM: Millennials were a growing part of the market, but given their often precarious financial circumstances, it seems like their participation will be less for the next year or so.

(New York)

Yes, you read that right, Bank of America is forecasting a 35%+ GDP fall for the YEAR, not just Q2. The bank thinks the Coronavirus downturn is so bad that the US economy will shrink 7% in Q1, 30% in Q2, and 1% in Q3, a cumulative 35.55% for the year. The downturn would be the worst to ever strike the US.

FINSUM: This is by far the bleakest projection we have seen. Goldman, for instance, sees 19% growth in Q3. So if the economy shrinks 35% this year, what is fair market value for the S&P 500?

(New York)

Goldman Sachs, who has been a leader in putting out new research n the economic effects of the current lockdown, has issued new guidance on this week’s pending jobless claims. The bank thinks jobless claims will increase to a whopping 6m this week. If that happens, it would mean this week’s figure would exceed the record that stood until last week by a whopping 9x. The coming release will cover the week from March 22-28th. “Jobless claims will be the timeliest hard data point for assessing the depth of the recession and catching the start of the recovery”, says Goldman.

FINSUM: The period the release covers is not even likely to be the worst. There is probably still a few weeks before the full scale of the layoffs becomes apparent and the numbers peak.

(New York)

Citibank is pitching a convincing and optimistic view of the economy, and it is a refreshing take in an otherwise bleak landscape. The bank says the big influx of tests that will become available may allow the economy to open much sooner than planned. Their argument is that the growth in tests will allow 60% of working-age US individuals to be tested by the end of April, and 95% by the end of May. As workers are tested, they can head back to work, quickly re-opening the economy. Accordingly, by the end of this month 90 million Americans may be back at work. “While potential therapeutic strategies for COVID-19 seize headlines, we believe diagnostics rather than therapeutics are far better positioned to materially change the economic and even medical outlook for the current COVID-19 pandemic”, says Citi.

FINSUM: Honestly, this sounds like more of a plan than a forecast, but it is a very good one, and does lend some useful optimism.