This entry is pure news, facts, and figures (as at March 2020) – little personal commentary here. As we enter another week marred with fear and chaos, I hope this entry provides some perspective on what may lie ahead. Word of the month: “unprecedented”.
I hope you and your loved ones are staying put, abiding by the ‘stay at home’ decree imposed by many governments, and exercising precaution.
- Economists at Goldman Sachs warn of a 24% collapse in US GDP. As the world descends into a global recession, experts from many banks provided grim outlooks on GDP expectations. Typically, economic contractions and expansions happen gradually with slowing production and economic activity. However, in the case of COVID-19, the sudden and spectacular halt of major economic activity from the big companies to small businesses has left economists in what some are calling “pervasive Knightian uncertainty” – that is an ‘unknown’ for which even the odds of different outcomes cannot be quantified. Goldman projects a 24% drop in GDP in Q2 followed by a 12% and 10% jump in Q3 and Q4 respectively, putting the annual growth at -3.8%. Several other bank economists weighed in on their estimates of where they see GDP numbers ahead. “Historic, unprecedented, impossible, and unrecognizable” are the common descriptors you will encounter as you read the full report (Yahoo Finance by Sam Ro).
- On March 12, 2020 the Dow Jones recorded the biggest point drop in its history. Let’s not confuse point drop with percentage drop. The largest percentage drop happened on Black Monday in 1987 when the Dow dropped 22 percent. Needless to say, the 2,997-point drop sent shock waves around the globe as the frenzy enveloped the markets. The Dow had been inching closer to a record 30,000 only weeks earlier but the COVID-19 storm has led to a colossal sell-off, uncertainty, and investor fear (Vox by Ian Millhiser). In my opinion, March 2020 must be the worst month in the history of the Dow Jones and Nasdaq – and the month is not even over yet.
- Did you hear that right: 0%, Zero Fed rate? Yes, 0 – 0.25% to be precise. The emergency rate cut was announced by the Federal Reserve as a form of relief to counter the fallout from COVID-19 panic. However, what does the 0% Fed rate mean for your mortgage? Anna Bahney tackles the question: mortgage rates will not go to zero; note that the fed funds rate is the overnight rate that banks pay to borrow money. Since individuals pose a higher risk than the US Treasury, you would pay a couple of percentage points more. Should you refinance? Banks are inundated with applications right now and you would see the rates normalize to a low with better opportunity with regard to timing to refinance as the year progresses says Greg McBride (chief financial analyst at Bankrate). Lastly, though rates entice buyers to go house shopping given a cheap mechanism of financing, the social distancing instituted by governments hampers ability of shoppers and buyers to come in direct contact which may counter the positive effect of the low rates. It is too early to predict what will happen as 2020 progresses (CNN Business by Anna Bahney).
- Donald Trump’s trillion-dollar bailout could fund the Environmental Protection Agency for 120 years, buy every American adult four iPhone 11 pros, or fund a complete border wall with Mexico twenty times over. Who qualifies for a bailout is a pressing question which will be fought among the politicians in the coming weeks if not days. Part of Trump’s proposal is a $300 billion loan guarantee program for small businesses to help keep their workforce on payroll for eight weeks. However the audacious plan has severe gaps given there are 28 million small businesses in America who would be bound to pay back the loan for keeping their payroll active for eight weeks under lockdown (more on Politico by Michael Grunwald).
- Italy summoned its military to help accelerate production of ventilators. Siare Engineering International Group (Siare) is a privately held Italian electromedical supply company whose short-term goal is to double production to 500 ventilators per month. Siare is the only ventilator maker in the country and one of four in all of Europe. Canada has no manufacturer of hospital-grade ventilators and thus relies solely on imports. Ventilators are required by patients in critical care to help with their breathing and in Italy at least 9% of those who test positive for COVID-19 require ventilators. Siare’s ventilators retail for up to $18,500 apiece. Britain and the United States governments have requested automakers and companies like Tesla and GE to manufacture ventilators and other medical equipment to help with the crisis. The US Society for Critical Care Medicine forecasts that close to a million patients in the US may need ventilators as a result of COVID-19 – the country currently has approximately 200,000 ventilators half of which may not qualify for critically ill patient needs (Globe and Mail by Eric Reguly).
- Pound sterling nosedived to its lowest level since 1985, beating Brexit lows as at March 18, 2020. A number of factors led to the decline including Boris Johnson’s lackluster response to the Coronavirus pandemic and increasing demand for the greenback (considered a safe haven). Bloomberg forecasts the pound at $1.30 by June 2020 (Bloomberg by Ritchie and Debnath).
- 20 bucks! Yup that’s what a barrel of oil costs right now, a reality no one could have predicted. Oil prices took a plunge for the worse as negotiations between Saudi Arabia and Russia on oil production fell through. Saudi Arabia retaliated by initiating an $8 per barrel selling price and mandating production of 12 million barrels per day. With global air travel at standstill and stay at home decrees in effect, the demand for oil quickly dwindled – “too much oil for too few takers”. Giants like Chevron, ExxonMobil, and Shell have shelved multi-billion dollar projects for now. Oil behemoth Halliburton furloughed 3,500 employees in Houston for 60 days. It’s hard to tell where price per barrel will land but as it stands, pessimism is the overshadowing theme as far as oil markets are concerned (Forbes by Gaurav Sharma).
- Harvard University postponed its 369th commencement exercises, indefinitely. The university is expected to host an unprecedented virtual commencement on the originally scheduled date of May 28, 2020. “Each School at Harvard will also host its own special online event and afterwards deliver diplomas through the mail” said university president Lawrence S. Bacow. The university does plan to complement that with an in-person ceremony in the future. The university also announced moving all classes online after Spring break – a pivot that mirrors provisions made against the backdrop of World War II in the 1940s (Harvard Crimson by Michelle G. Kurilla). Several other universities including my current school Oxford, have followed suit with moving classes online.
- In an unprecedented move, the CFA Institute has decided to postpone its June 2020 examinations to at least December 2020. Approximately 245,000 people around the world were scheduled to take the marathon exams (Level I, II, and III) in June 2020 (Business Insider by Bryan Pietsch).
- In an unprecedented move, Canada closed its border with the United States. Nearly 200,000 people cross the US-Canada border every day, a number that will dwindle due to the new restriction. The closure impacts nonessential travel while trade continues between the two friendly nations. Canada relies on the United States for circa 75% of exports and 18% of imports; and is America’s second largest trading partner after China. An estimated $2 billion of goods and services cross the US-Canada border daily (Forbes by Sandra MacGregor).
- Amazon announced that until April 5th its warehouses will only accept items deemed “essential goods”. While the company will continue to ship nonessential items already stocked in its warehouses, these items will not be replenished for at least a 3-week period. This is bad news for sellers of nonessential items at least for the short-term but a responsible move by Amazon given the pandemic (More on Vox by Aja Romano) .
- Here are some interesting internet apps getting us through the quarantine: ‘Netflix party’ developed by an Airbnb engineer in 2015 is a chrome browser plug-in which lets Netflix users watch movies on the platform together. The plug-in is experiencing a massive surge in traffic since the start of the quarantine. Metal band ‘Code Orange’ hosted its album release party on the Twitch app. Birthday parties are moving to Google Hangouts and board game nights to Zoom, a platform generally used for virtual business meetings. Popular event discovery platform, Eventbrite, has added a ‘upcoming virtual events’ category (More on Vox by Aja Romano).
References: Yahoo Finance, Vox, CNN Business, Politico, Globe and Mail, Bloomberg, Forbes, Harvard Crimson, and Business Insider. Please note that this briefing contains paraphrased summaries and attributes the original content to the news sources. We encourage readers to visit the links to access the full article in its original form for a thorough and complete view. You may need to subscribe to the news agency and source for access.