The Good
- Support from both monetary policy and fiscal stimulus has been remarkable both in its size and swiftness. New initiatives have emerged at rapid speed to offset the worst impact of the downturn and to try to ensure a rapid and vigorous recovery. In effect, the Fed has taken more action than in the entire Global Financial Crisis (GFC) in just a few weeks.
- The earliest countries to contract the coronavirus have shown good progress regarding recovery.
- The banks are much less vulnerable than they were during the Financial Crisis, with only a third of the leverage. Thus, concerns for the health of the overall financial system are greatly reduced.
The Bad
- The Fed announced a simply historic set of measures designed to support the bond and credit markets, but this plan only supports liquidity in the market, and does not fix the underlying solvency problems for corporations.
- The good news for the VIX is that it is off of its recent highs. The bad news is that it hit levels not seen since ’08/’09.
The Ugly
- The Unknown – The success of other countries in slowing the disease have been a function of widespread social distancing, testing, and temperature-taking to identify those who are infected. The U.S. is behind in all these regards.
- The economy will contract at a record pace, given that many millions of Americans will be unable to work and will be unable to patronize businesses. Many workers will miss paychecks and businesses will miss revenues.
Read the rest of the story in our Q1 Chart Book here
DISCLOSURES
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