A client astutely asked what we saw as the “markers” going forward over the next few months. Ordinarily, we might point to traditional economic and financial data (i.e., earnings, GDP growth, interest rates, inflation, etc.). But now, as the US begins re-opening, the metrics that matter in the short-term are the Coronavirus dashboard numbers (new confirmed cases and # tested). Axios If these metrics are relatively positive, from state to state and from community to community, then we expect to see the US economy gradually recover. Long-term, the US only recovers fully when there is widespread effective Coronavirus testing, vaccination and treatment.
The US economy has severely contracted. We expect US economic data for the first, second and third quarter to be negative, perhaps shockingly so. Whether we will see more positive data for the fourth calendar quarter of 2020 will depend almost entirely on whether the re-opening is successful and does not trigger a meaningful Coronavirus resurgence. While everyone acknowledges the need to get back to work, consumers and workers are concerned about trying to move too fast. Washington Post Stock market investors, who tend to look forward, appear to be relatively positive, with the US recovering over half of its 2020 losses to date. Business owners and executives, fearful of damage already done and to come, are less sanguine. Axios
What are the long-term implications for this pandemic and the massive government response? What will change? Some good minds are thinking about these questions:
- The End of Globalization? World trade benefits all and will continue, but the world economy is going to look different. Countries will increasingly think more about protection in the broader sense. Do you want a high percentage of your pharmaceuticals coming from a global competitor? How dependent do you want the key supply chains of your leading companies to be on other economies, friendly or otherwise? New York Times Axios
- The Fed and Stock Market Risk: Has the massive Fed support for the US economy and financial markets fundamentally changed the risk of owning stocks? Investment theory teaches that stocks will earn a premium over less risky assets over long time frames because stock investors are assuming greater risk. No risk, no gain, so to speak. But what if the Fed has become this giant US economic insurance policy? This seems to be good news, but should US stock investors expect the same return if the risk is less? MSN.com Speaking of which, the Fed is considering its next options. New York Times
- The Coronavirus and Higher Education: Colleges and universities are in turmoil due to the pandemic and are facing enormous financial and mission challenges. Might we look back and view the pandemic as the impetus for a vast restructuring of higher education? On-line learning, for better or worse, is already ubiquitous. Could on campus learning become more the equivalent of the traditional junior year abroad? I suspect that many leaders of educational institutions at all levels are thinking about these things. Axios
- The Coronavirus and Retail Shopping: How will we shop going forward? The trend to on-line shopping was already strong but will it accelerate? This article makes 10 predictions for changes in retail shopping post-pandemic: Boston Globe
- The Coronavirus and the Home Market: This is both heartening and surprising to me, but applications for home purchase mortgages rose strongly in April after a sharp March contraction. I take it as a good sign of underlying and fundamental economic resilience. CNBC
- Netflix Displaces Broadcast TV: Quoting this article, “It’s Netflix’s world. We are all just living in it”. The growth in subscriptions is eye-opening. Since we are all at home and looking for nightly entertainment after we get back from walking around the block, the trend is not the least surprising but is still impressive. Wouldn’t it be fun to listen to Jeff Bezos discuss his plans for Amazon Prime and for competing with Netflix? CNBC
- Stress Eating: Would everyone who is dealing with stress eating these days, please stand up out there? Ok, great, thanks, all of us can sit down now! Dr. Judson Brewer, a habit and mindfulness expert, has some interesting ideas for us. Medium.com
- Jack Kornfield Talks About Coping in These Times: Legendary meditation guru, Jack Kornfield offers insights in how to cope with what we are going through. This is courtesy of a wise and thoughtful client herself. New York Times
- Quote I Like: “In the midst of winter, I found there was, within me, an invincible summer. And that makes me happy.” Albert Camus
Feel free to send us feedback on any topic or make a request or to forward the notes on to anyone who might be interested.