Reasons to be pessimistic:
- Almost 10 million people filed for unemployment insurance
- GDP growth is poised to fall by an unfathomable 34% in 2Q20 (Q/Q, annualized), with the steepest drop expected in April
- S&P 500 earnings are forecast to fall to $110/share in 2020 with 2Q20 EPS estimated to be down 123%. GS now forecasts a 25% decline in S&P 500 dividends
- Supply chains are intertwined in this world such that even the recovery in China is struggling to maintain a purchase in the most secularly advantaged sector:
- The US High Yield credit market is poised to potentially have to absorb an additional $555bn in Investment Grade downgrades as a huge swath of BBB-rated companies are re-evaluated in the coronacrisis.
Reason to be optimistic
- Monetary stimulus has been swift, targeted, and appears to be almost unlimited
- Fiscal stimulus is now in place to support individuals who are losing their jobs, incentivize companies to keep people employed, and provide a financial backstop to corporates
- China activity has already begun a nascent recovery, providing a lens for US investors on how things may look once the impact of virus mitigation efforts begins to wane
- Pharmaceutical companies remain focused on developing vaccines and treatments for the virus
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.