As the new year began, the global economy, including the U.S., was showing nascent signs of emerging from a tariff-induced manufacturing slow down. The Federal Reserve (Fed) and other central banks were engaged in lowering interest rates, the employment market was healthy – particularly in the U.S. – earnings expectations were improving, and stock markets were at record levels.
However, there were other dimensions to this backdrop that were not so favorable. Brexit and Eurozone politics were a concern, oil markets were in flux, and the U.S. was facing an uncertain political future with the upcoming presidential election. All of that seems like ancient history now.
The coronavirus black swan
We are now painfully familiar with the necessary steps that health officials and governments around the world have put in place to fight this virus and save lives. In doing so, it has required the unprecedented lock down of the global economy.
The consequences of these actions have been pervasive, with the major impact being the immediate, large scale loss of jobs and, thus, income. The banking and credit systems have been thrown into some disarray, as borrowers may not be able to service their debts due to a loss of income and cash flow. The shockingly swift, pervasive and sizeable loss of jobs is shown in the U.S. unemployment statistics (below) . The final figure, 6.65 million claims, is from the week ending March 28: