GDP Expectations, Record-High Uncertainty, & the Role of Small Businesses
April 15, 2020 | FIRESIDE CHARTS
While high-frequency measures such as the New York Fed’s Weekly Economic Index have us bracing for significant losses to GDP, consensus on expectations is a hard thing to come by these days. Macroeconomic uncertainty has reached unprecedented levels and every analyst out their has their own unique interpretation…which should make for an interesting earnings season. A couple things are certain though: the federal deficit is soaring, and the bill will eventually come due. But will future generations be able to afford it when so many are employed by small businesses without the resources to survive a sustained halt to normal economic activity? Layoffs and furloughs are already at historic highs, and a look at the past shows that job recovery can be a slow process. Meanwhile, despite the rocky state of the equity markets, bonds have experienced their own sell-off and market flows have taken a significant hit. Will the massive fiscal and monetary easing packages help draw investors back to the market?
1. While we try to stay away from predictions, measures such as the New York Fed’s Weekly Economic Index signal an extreme oncoming quarterly contraction in GDP.
Source: WSJ Daily Shot, from 4/15/20
2. Here is the issue: there is a record high or wide dispersion of the GDP, employment and earnings estimates. One analyst’s disaster could provide another analyst relief and joy. Same print, different expectations…
Source: WSJ Daily Shot, from 4/15/20
3. Remember that future generations must pay off all this debt…
Source: WSJ Daily Shot, from 4/14/20
4. Unemployment should continue to rise as most small and mid-sized companies can’t survive for long without sales.
Source: WSJ Daily Shot, from 4/14/20
5. Small and medium sized businesses employ over half of Americans…
Source: Statista, as of 12/31/19
6. After the last two recessions, full job recovery took 4-6 years…
Source: WSJ Daily Shot, from 4/15/20
7. During the height of the stock sell-off, bonds sold off too prompting the Fed to act quickly and decisively. Here is the flow data:
Source: Bianco Research, as of 4/8/20
8. Emerging markets have been disproportionately hit by capital withdrawals. Since they rely on foreign capital to fund much of their economies, their markets and currencies have suffered. Has the market overreacted?
Source: WSJ Daily Shot, 4/15/20
9. A good illustration of each State’s Covid-19 response. How will we manage reopening when seven States have yet to enter quarantine stage and another five just started last week? Now add Mexico, Canada and the rest of the world…
Source: WSJ Daily Shot, 4/15/20
10. What is your opinion?
Source: WSJ Daily Shot, from 4/14/20
Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be helf in client accounts.