Historic Unemployment, Corporate Borrowing Surges, Chinese Economic Output Normalizes

Unemployment spiked at an unprecedented rate (and to historic levels) this week as layoffs and shutdowns pick up steam across the country. Corporations are borrowing heavily to ride out the crisis, with new loan totals reaching $200 billion in just the past few weeks. But could carrying so much additional debt spell trouble for the future? At 9.3% of GDP and 30% larger than comparable legislation from the financial crisis, this week’s stimulus package will hopefully provide some relief, at least. While Wall Street did post its first back-to-back gains since February this week, volatility is still at historic levels. Investors are piling into fixed income in a search for “safe haven,” but distressed bonds are at their highest peak since 2009 and in many cases are exacerbating portfolio losses. Meanwhile, China’s industrial profits may be be down almost 40% year-over-year, but the speed of their post-2008 recovery and how quickly current economic output is already normalizing paints a hopeful picture of life on the other side of the coronavirus crisis, but it’s yet to be seen if they lifted the lockdown too quickly.