Leading global central banks like the US Federal Reserve, the European Central Bank, Bank of Japan, Bank of England and so on are printing money to support the economy in the coronavirus disease COVID-19 pandemic.
Global stock markets have reacted positively, the US S&P 500 for example, entering a new bull market defined by more than 20% rise from the most recent low.
Will the liquidity provided by leading global central banks be able to prevent a new large fall of global stock markets? No. I do not think so. Basically, market participants are waiting for company earnings to sell off stocks again. I forecast the first quarter of 2020 earnings are going to be bad with earnings per share falling around 20% year on year compared to the first quarter of 2019.
And the second quarter of 2020 will be even worse with earnings per share falling by more than 40% year on according to my estimates.
So, no, money printing will not save the economy from a crash. Global GDP could fall by around 5% in 2020, while the GDPs of USA, European Union, Japan and China could fall by 8%, 10%, 7% and 6% respectively, as far as I am concerned.
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Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
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Respectfully yours,
Petar Posledovich
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