It’s getting increasingly difficult to say we’re not entering a recession. Pretty much every leading indicator is flashing red now. I’m expecting Q1 earnings reports and forecasts in a month to be the nail in the coffin.
Things are definitely looking bad, but given how optimistic the market has seemed over the past months even with lots of bad news coming out, I wouldn't be surprised if there's a pretty sharp recovery once Covid-19 is contained.
This isn't only because of COVID-19. The OPEC+ union between Russia and Saudi Arabia broke down yesterday. The Saudi's are now flooding the market with crude and are likely going to increase production to record levels. Crude is down 30% as of 3/9 1AM EST. This uncertainty (plus people moving out of energy bonds into treasuries) is also driving the flight to safety.
There are three solutions:<p>1) Government makes more treasuries, sells them to the fed, and spends the money on infrastructure. That increases government debt, but improves our deflation situation and shrinks the loan bubble a bit. Preventing a deleveraging.<p>2) Government literally prints money, and gives it to people. That will rapidly increase inflation, which will increase corporate profits, shrinking the loan bubble a bit, preventing a deleveraging.<p>3) Don't do 1 or 2 because it basically redistributes wealth. Wait for rich people to spend their massive wealth on CPI-style goods and services, causing poor people to eventually have and spend more money. This takes aeons.<p>As far as I can tell, the powers that be have decided that #3 is the solution, and absolutely refuse to have a stable monetary system that involves giving anything to poor people.
Every year the flu kills 640,000 people world wide. Right now we are at 3648 from coronavirus. Also there is a lot of evidence to suggest that the actual number of infections is much larger than the reported numbers. This means that the actual death rate is much lower than what is reported.<p>All of this smells like a massive over-reaction to the coronavirus.<p>There has been a correction to world markets going on for a while with the US being a possible exception. What actually shakes out it tough to say. Sadly, the markets are controlled just as much by sentiment as by actual hard data so...