Jim Bianco, from Bianco Research, Mike Shedlock from Money Maven, Dr Ben Hunt – author of Epsilon Theory and Dr Chris Martenson from Peak Prosperity discuss COVID-19 with Erik Townsend.
• They expect a global economic dislocation on a scale similar to the financial crisis. Extreme containment measures such as quarantines may be necessary around the globe. COVID-19 is a silent global pandemic and because of the long incubation period and the asymptomatic nature of the virus we don’t realise the full extent of what has already occurred.
• Singapore is one of very few countries who report the number of people tested and the data is likely to be accurate (unlike China’s). Indonesia not even testing.
• It’s not the flu or SARS, it has pandemic-like characteristics and US virus testing is much too low given high number of Chinese students in the country. He is convinced there is an outbreak ongoing in US if the health system were to test from them. CDC testing criteria too limited. People should prepare for lockdowns, school closures.
• Any assumption of a V-shaped recovery would assume no subsequent panic so we need confidence in local / global organisations. Global supply chains will undoubtedly be hit and deglobalisation set to increase.
• They see potential for huge political fallout in Japan due to the inadequate handling of the cruise ship cases and expects that Abe may have to resign if the Olympics are cancelled. He also highlights political pushback and local unrest in China where people don’t want to return to work.
• Manufacturers already having a hard time sourcing raw materials. In the pharma sector a high proportion of raw materials come from China. Deflationist side – stock market collapse is inherently inflationary. Fed will change towards cuts.
• Overall COVID-19 is an enormous recessionary shock. Stocks now catching up with bonds.
Why does this matter? Global stock markets have suffered their worst week since the financial crisis and predictions of a U or even L-shaped economic impact are mounting. Investors must determine whether this is a buying opportunity or instead the start of a significant equity correction and economic slowdown that will push interest rates down further.
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