Some thoughts on Covid 19, the economy and the markets....
This is different from every other market shock since the GFC in that it is clearly a real global economic event.
This is important because corrections are short-term non-fundamental events. This is a real fundamental event which means it will linger.
This is important because corrections are short-term non-fundamental events. This is a real fundamental event which means it will linger.
Although history rhymes and never repeats there is at least one good historical comp - the 1918 Spanish Flu.
The 1918 Spanish Flu killed an estimated 1.5-3% of the population and global GDP fell by ~5%. The US stock market fell by 25-30% at various points.
The actual economic impact was relatively short-lived as the flu mostly subsided in early 1919, but the medium-term stock market was still very uncertain and mostly sideways for years. 
The thing that makes this event behaviorally risk for many is the medium-term outlook. The Spanish Flu didn't really flare up until the fall of 1918 and early 1919. So, this could subside in Summer and then really scare us in late 2020.
The silver lining is, unlike 1919, we live in an age of abundance and increasingly so which is resulting in large declines in commodity prices and a virtual guarantee of lowflation all year. So, people with cash have the ultimate optionality as the year goes on.
The bottom line is - this too shall pass. But I think this one's gonna stick around for a while. It could drag sentiment and economic activity all year.
Diversification and the right behavioral hedges (read, long reserve currency bonds) have never been more important.
Diversification and the right behavioral hedges (read, long reserve currency bonds) have never been more important.
More importantly, be sure to take good care of yourself. I'm just a simple construction worker, but from what I've read:
- Wash your hands frequently.
- Don't touch your face.
- Stay hydrated.
- Don't shake hands.
- Be patient.
Have a great weekend.
- Wash your hands frequently.
- Don't touch your face.
- Stay hydrated.
- Don't shake hands.
- Be patient.
Have a great weekend.
