For roughly the last half year, my forecast has been that a slowdown without a recession was the most likely scenario, *IF* the economy were left to its own devices.
Well, given the horror scenarios possible with the coronavirus outbreak, the economy is certainly not being “left to its own devices.”
I took a look at how that intersects with my forecast over at Seeking Alpha.
As usual, clicking over and reading should be helpful to you, and rewards me a little bit for my work.
NDD:
Where this will play out is in the supply chain coming out of China. When this started, there was ~5 weeks in transit counting a week in customs on each end. In transit plus stock on hand maybe 8 weeks at the most if companies are doing the lean thingee. Container ships, etc. will be avoiding China until this blows over. China factories are probably running at half staff or closed. Next few weeks should tell us what will happen if China does not open up and ships avoid China.
Automotive for sure will run out of parts. The result will be temporary layoffs. Tier ones, twos, and threes supplying the OEMs with OEM specified components in assemblies will be the first hit. OEMs do keep an ~60-90 day inventory of autos/trucks. It will ripple on up.
Are we allowed to call it “The Trump Recession™”?
Yes, we are.
There is a silver lining in any dark cloud.
Trump might not survive the Coronavirus, literally (he is over 70 and has a high range of contacts; the mortality to this age group is close to 10%), or figuratively as voters might not forgive him inadequate and/or incompetent response (which is given) .
Unfortunately, Bernie is at even higher risk as mortality for 80+ is over 15%, and pre-existing cardiovascular disease is a serious negative factor.
One can wonder if this will be the straw the broke that camel back for Trump. With 10% drop of S&P500 (aka “correction”) it is difficult to talk about booming economy on rallies ( 20% decline marker defines a recession and some stocks — like oil sector are already in this territory )
High yield bonds are also going down, although more slowly.
Now suddenly, Trump has nothing to talk about on his rallies, and he knows it.
A part of rich retirees who are overexposed to stocks constitutes a sizable part of remaining avid “Trumpers” voter block (kind of double stupidity, if you wish 🙂 , and some of them might not forgive Trump the liberty of depriving them honestly earned in 2019 ~10% of their 401K accounts.
IMHO troubles for Trump just started. Being incompetent DJT and his merry band of grifters will almost definitely botch the response.
They already made three blunders.
1. When asked if, and when, a vaccine is produced, would the vaccine be affordable to everyone? They replied; We’ll let the “market” decide that. And some part of electorate probably noted that.
2. The last December, they cut the budget for the CDC (center for disease control).
3. They exposed government workers to the virus without any need to do that, only due to bureaucratic incompetence: https://science.slashdot.org/story/20/02/27/2353236/us-health-workers-responding-to-coronavirus-lacked-training-and-protective-gear-whistle-blower-says
In this sense appointing Pence as the head of the coronavirus response may be a smart move by Trump. When and if the pandemic hits big time, exposing the mass incompetence and unpreparedness of the US government, in combination with the tanking of the stock market, Trump can, of course, blame Christian Zionist neoconservative Israeli apartheid supporter Pence for his troubles 😉
But, unfortunately, that will not do him any good.
Libnez – agreed with your comment right up to the last sentence. “unfortunately” should be “fortunately” – at least from my point of view.