During the past week, more economic data in the U.S. was released, showing the extraordinary impact of the COVID-19 pandemic. After a record number of 3.3 million unemployment claims for the preceding week, that amount was shattered with twice the number of claims last week. It is hard to put those 6.6 million unemployment filings into perspective given historical economic data. We do appear on a path to see unemployment rise by approximately 10% within a short number of months. I expect the gross domestic product for the first and second quarter to show very large declines, while deflation increases.
A major challenge to understanding the impact of the economic slowdown is how to interpret the data when no comparison exists. As a result, I am not sure how useful the data will be over the next few months for understanding where we are going in markets, as fundamental data tends to be a lagging indicator. Given the speed of the decline, it will be difficult to extrapolate forward. Needless to say, we are going to have a very severe global recession. The key determinants of whether it becomes something much worse will be how effective the stimulus is, how quickly we can start to return to greater normalcy and if global policymakers are able to work together. Over the next few weeks, I will be watching the evolution of the medical information on the spread of the virus and corporate earnings more than economic data.
I expect market volatility to remain elevated. I continue to like selling rallies and buying dips, as a clear direction in most markets is difficult to determine.
Be safe, remain strong and steadfast.
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