Reasons to be pessimistic and optimistic…

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by WSBConsensus

Reasons to be pessimistic:

  1. Almost 10 million people filed for unemployment insurance
  2. GDP growth is poised to fall by an unfathomable 34% in 2Q20 (Q/Q, annualized), with the steepest drop expected in April
  3. 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
  4. 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:
  5. 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

  1. Monetary stimulus has been swift, targeted, and appears to be almost unlimited
  2. 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
  3. 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
  4. 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.


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