Dear Reader,
The coronavirus disease COVID-19 has had an initially devastating, but in sum up till now a relatively subdued effect on global markets with global stock market indices down between 10% to 17% year to date in 2020.
The main reason that the coronavirus effect on stock markets has been relatively mild is the strong support from global central banks who started buying massively government bonds, high yield corporate bonds, municipal bonds, commercial paper securities and even equities in some cases. Global central banks financed these purchases by creating monetary reserves by basically printing money.
Usually, central banks are tasked with solving short-term liquidity problems for markets and the economy. And as of now global central banks seem to be solving the short-term liquidity problems for global companies and the global economy. The fiscal policy is usually responsible for handling mid-term solvency problems. And governments all over the world have reacted forcefully to support the economy by spending a lot of money to finance workers' salaries and plan to buy stakes in troubled companies. Both monetary and fiscal policy have managed to hold the global economy from falling into the abyss. Yes, the global economy will record a deep recession in 2020. I prognosticate global GDP will shrink between 3% and 7% in 2020. If I have to put a single number in, I forecast the global economy will shrink by 5.5% in 2020.
Otherwise, I forecast global stock markets, as measured by the leading stock indices in USA, Europe and Asia, will fall about 40% from current levels to reflect the global economic difficulties. The US elections will soon pass and the US will stop underwriting the global economy and stock markets. And something similar to the Great Recession in 2008-2009 will happen and stock markets will correct by a lot.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
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