financial weather watch

Does the China COVID recovery point to a V-shaped US recovery?

With the COVID-19 shutdown profoundly impacting the US economy with over 30 million job losses, just one in 10 fund managers expect a V-shaped recovery according to the FT. Is this the right call? Luckily we can look to the Far East as a crystal ball and what we may have in store in the next few months.

China re-opened their economy in mid-February so they are about 3-5 months ahead of the US economy as the US is opening states at differing schedules.

What does it suggest about a V-shaped recovery? Some sectors have rebounded in a strong V, while others have been slow to recover. Let's take a closer look.

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Macau casinos show what to expect from a Las Vegas reopening

Recently, the Las Vegas mayor Carolyn Goodman made waves for pushing for the reopening of Las Vegas. While it may not make sense from a health perspective, their economy relies on tourism, conference and gambling. Even if the governor decides to reopen, it isn't clear how quickly things can return to anything close to normal. Casinos will need to spend more on regular cleanings and gamblers will likely need to wear masks, have their temperatures checked, and sit with social distancing. This doesn't sound like an ideal environment to gamble. Whatever the case, we can look the Far East to the Macau casinos to see how they have done.

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How many jobs aren’t coming back right away?

In the last three weeks, over 15 million people have filed jobless claims. This is sharpest employment loss in history. The unemployment rate will surpass 15% in short order and could even go to 20%+. Optimists say that when the economy re-starts, jobs will return; however, we are concerned that not all jobs will come back right away and employment will take time to recover.

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Don’t fight the Fed

There is an investment adage that says, “Don't fight the Fed.” Put simply, when the Fed is providing liquidity to the markets, it should be an overall positive for the stock market, and you should be invested. Historically, this meant investors should watch what the Fed is doing in terms of interest rate policy. Today, with the Fed already hacking the rate back to zero, investors have to look at quantitative easing and it is truly epic.

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