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By Bilal Hafeez 24-03-2020
In: post | Newsletter

Macro Hive: COVID Tracker + Top Picks: Rajan On A Global Response / COVID And Cash / UK Helicopter Money

(7 min read)
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We are constantly adjusting our COVID tracker to provide the most useful information as the situation evolves. Our latest update looks at daily rather than cumulative cases and provides a heatmap scaled by population. Spain and Switzerland have recorded the biggest daily increases while the US looks worrying given the increasing momentum.

For our regular curated blogs, we feature Ben Bernanke and Janet Yellen on what the Fed should do to help contain the crisis, former IMF Chief Economist Raghuram Rajan on why global leadership is needed to truly contain the virus and Norman Lamont on why the UK needs helicopter money to help the self-employed.

We also feature an interesting article on COVID-19 means for the future of cash, a worst-case scenario for coronavirus based on findings from the Spanish flu and a suggested roadmap for the G20.

We have also added podcasts to our Tuesday curations. We feature Goldman Sachs for a market take on how the coronavirus compares to the global financial crisis, Claudia Sahm on why direct payments to households are an effective fiscal tool and Adam Tooze on Europe’s response to the crisis.

We’ve also made all our curated content (Top Picks and Podcast Playlists) viewable without the need to log in.





Hive Indicators

COVID-19 Country Tracker

• There’s always a challenge to easily capture the dynamics of COVID-19. One neat way is to look at daily cases rather than cumulative cases – it gives you a better sense of which countries are in the eye of the storm.

Coronavirus COVID-19

• I show a heatmap of daily cases (normalised to population) for a range of DM countries. You see how in recent days we have entered a sea of red. Spain and Switzerland have seen some big increases in recent days.

• In terms of momentum, the US is seeing higher daily cases day after day. The UK appears to be containing the acceleration for now.

(Bilal Hafeez | 24th March, 2020)


Earning recessions and timing the stock market

What Will An Earnings Recession Look Like? (JPMorgan Asset Management, 2 min read) Given what could be a double-digit decline in earnings, companies with low leverage, strong margins and some pricing power are preferred in the short-to-medium term. Longer-term investors should focus on stocks where valuations look cheap, such as financials, energy and other cyclical sectors.

What If You Buy Stocks Too Early During a Market Crash? (Wealth of Common Sense, 4 min readBuying too early, or too late, after a stock market fall can still lead to sizeable returns, albeit less than in the unlikely event you could time the low perfectly. Keeping cash on the sidelines for too long could be much more costly.


Former Fed chairs on monetary policy and Lamont on helicopter money

Bernanke and Yellen: the Federal Reserve Must Reduce Long-term Damage From Coronavirus (FT, 5 min read) With the underlying cause of the current crisis very different to 2008 reviving parts of the GFC toolkit cannot fully counteract current economic stress. Policymakers must employ measures to ensure the economy can rebound quickly – such as ensuring credit is available for healthy businesses – part of which is by purchasing corporate bonds (article from 18 March and therefore before the latest Fed measures).

Why We May Need Helicopter Money (OMFIF, 3 min read) With the self-employed accounting for 15% of Britain’s labour force the UK should, according to former Chancellor Normal Lamont, turn to helicopter money to avoid further hardship. Universal credit and statutory sick pay do not go far enough.

A Proposal for a Covid Credit Line (VoxEU, 5 min read) Using the ESM for a new long-term Covid Credit Line would circumvent the problem of no joint debt issuance in the EU while allowing the worst effected economies access to credit, the cost of which would not be linked to individual fiscal positions.


Rajan on the need for global leadership to flight COVID-19 and the case for higher sick pay in the US

Creative Economic Solutions Could Help Us Avoid the Next Great Depression (Washington Centre for Equitable Growth, 5 min read) More generous sick pay would help the economy recover more quickly and reduce hardship for those affected. A universal income floor for the duration of the crisis would work better than a one-off payment and Denmark’s example of paying 75% of workers’ salaries for the next several months should be replicated.

Rich Countries Cannot Win the War Against Coronavirus Alone (FT, 4 min read) Raghuram Rajan argues that while rich countries may have the wealth and administrative capacity to respond to the coronavirus without strong global leadership to facilitate assistance to those less well able to respond the virus cannot be fully defeated. The IMF, WHO and easing in trade restrictions can all play an important role.

How to Get to a UBI (Crooked Timber, 3 min read) Australia’s decision to increase welfare benefits within the existing system for those unemployed due to coronavirus is a first step to introducing a universal basic income.

Why Such a Large Difference in Fatality Rates Across European Nations? (Marginal Revolution, 1 min read) Countries where the young and old are more likely to live together, those with a larger share of smokers and those more tactile could be a way to explain the higher fatality rates in countries such as Italy.


A worst case scenario from COVID-19 and Frenkel on his recession call

Why Odds of a Coronavirus Recession Have Risen (The Harvard Gazette, 10 min read) Jeremy Frankel discusses his February (and at the time early) call for a rising likelihood of global recession. Lack of fiscal space in the US won’t help and the economy is likely to face parallels with the financial crisis and the 2001 terrorist attacks.

The Coronavirus and the Great Influenza Epidemic: Lessons from the “Spanish Flu” for the Coronavirus’ Potential Effects on Mortality and Economic Activity (American Enterprise Institute, 25 page read) A worst case scenario for COVID-19 based on the Spanish flu of 1918-1920 could mean some 2% of world population, or 150mn people, may lose their lives, economic contraction of around 6% and real returns on assets falling sharply.

The Coronavirus World Recession (George Magnus, 4 min read) The current economic contraction is a four-fold hit from; a wealth effect from the stock market declines, a demand shock from the quarantine measures, a supply shock from the inability to work and exacerbated credit and default risk. Fiscal support will help but may not be fully able to support spending and borrowing until confidence in public health systems return.


A roadmap for the G20 plus two centuries of large-scale official lending during crises

What the G20 Must Do (Project Syndicate, 4 min read) The G20 must step up with a coordinated fiscal effort, which could provide twice the impact of individual stimulus done in isolation, it should formally bring the WHO into its discussions, establish a fund to support WHO monitoring and research, lead by example and cancel all remaining in-person meetings scheduled for this year.

The Coronavirus Could Reshape Global Order (Foreign Affairs, 10 min read) China’s dominance in producing masks, respirators and other needed equipment combined with its decision to help countries such as Italy and Iran could shape foreign policy once the virus has been defeated. But the US could yet turnaround what has so far been an inadequate response, both domestically and globally.

Coping With Disasters: Lessons From Two Centuries of International Response (VoxEU, 6 min read) Data covering the past two centuries show that official lending generally spikes in times of crisis (war /natural disaster etc) with 1940-44 seeing 10% of US GDP extended annually, or $2trn in current terms. Large scale cross-border lending may therefore be a hallmark of COVID-19.


Why current funding stress differs from 2008 and COVID’s impact on cash use

The COVID-19 Cash Out (Project Syndicate, 4 min read) The high likelihood of banknotes transmitting the coronavirus will push faster adoption of card payments, particularly in Asia which already has well developed cashless infrastructure. Cultural and technological factors have kept cash dependency higher in the West but COVID-19 could well change this.

USD Funding Stresses Rise But This Is Not Like 2008 (Variant Perception, 1 min read) A less leveraged, more highly capitalised and tighter regulated banking system leaves the financial system more robust than in 2008. Moreover, today’s funding pressures are concentrated in offshore USD markets.


The case for China’s insulation from global recession and lessons from its policy response

Is China a Safe Haven? (Matthews Asia, 8 min read) Space for significant further stimulus and a strong structural position (including high savings) going into the coronavirus crisis suggests the economy should be able to bounce back once the virus is fully eliminated. The country’s domestic-demand driven growth model should mean a global recession does not overly restrain China’s recovery.

Blunting the Impact and Hard Choices: Early Lessons from China (IMF, 3 min read) Policy support to counteract the coronavirus needs specific measures for the most vulnerable through, say, waiving utility bills and social security payments. Other measures such as credit extension are also valuable but can heighten financial stability risks and reduce productivity further down the line if not well targeted.

Chinese Factories Face New Threat: US Anti-virus Controls (AP News, 4 min read) Containment measures in the US could threaten the Chinese economic recovery as plummeting demand leads to reduced need for manufactured components from China.


ESG in the time of COVID-19

Can Companies Score ESG Points Under Pandemic Pressure? (Wealth Professional, 2 min read) Companies’ response to the coronavirus will be a key test of commitment to stakeholder value. Microsoft and Alphabet are scoring well by continuing to pay staff while several airlines are doing the opposite.

One Month in, Sustainable Funds Show They Can Handle a Bear Market (ESG Advisor, 4 min read) ESG funds have so far outperformed during the market sell off based on several different metrics. They are also the companies most likely to help us through the current crisis.


GFC vs Corona Crisis


Markets Update: How COVID-19 Is And Isn’t Like the ’08 Financial Crisis (Exchanges at Goldman Sachs, 14 min listen) Goldman’s head of equity trading for Americas discusses similarities and differences between the current crisis and that of 2008. In 2008 we knew what needed to be fixed. Now, liquidity won’t solve the underlying problems of workers losing jobs due to the virus. There is also much less space for policy response in this crisis. But that said, the response is as good as it can be and equity markets are starting to realise that the Fed is doing all that it can.


Claudia Sahm On Direct Payments To Individuals And Other Policy Responses To The COVID-19 Crisis (Macro Musings, 56 min listen) Claudia Sahm projects the current shock will be twice as severe as the great recession given activity has shut down and a huge share of the workforce are constrained at home. We must act fast and go big with policy support. We need an array of policies to ensure maximum effectiveness and direct payments are useful as they can get a lot of money into the economy very quickly.

But unemployment insurance and food stamps should also be stepped up now. Important that fiscal support must not be taken away too quickly, as was the case in 2008, say until the labour market improves.


Christian Lagarde

Adam Tooze Part 2 (Talking Politics – LRB, 29 min listen) Christine Lagarde’s ECB press conference was a blunder from the point of view of market stabilisation. But now they are all in on bond buying with earlier caps/restrictions lifted. This was the easiest fix to avoid the difficulty of issuing EU-wide corona bonds. Is it really true that “There are no limits”? The ECB probably hopes this will never be tested. Confidence in Lagarde’s abilities has been dented and we may now see a retreat to a more anonymous form of ECB leadership. This could be good news.




(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)