by Sean Kelly
As we struggle to social distance, engage in frequent handwashing, don mouth coverings, and toss our delivery boxes outside until the germs dissipate – we anxiously wait for the coronavirus to weaken and fritter away. Some of us follow the daily virus tolls, others bury ourselves in remote work, still others watch re-runs of old NBA and MLB games as a distraction from the daily gloom.
America is clearly in the midst of a collective anxiety attack. We will get through this but when we finally gather, engage and exhale again – we’ll have to contend with a world that looks a bit different than the one we knew just a few months ago.
When the virus arrived in the U.S. in late January, the Dow Jones was nearing 29,000. Today it has slipped more than 21%. Unemployment was sitting at an historically low 3.6%. The latest jobs report shows up to 10 million new jobless claims and an unemployment outlook that could go as high as 32%, worse than the darkest days of the Great Depression. Back in January the International Monetary Fund projected global GDP to hit 3.3% for the year, but the latest estimates suggest that the world economy will shrink.
Jamie Dimon, the chief executive officer of JPMorgan Chase & Co. and the only current bank CEO to weather the subprime mortgage meltdown and crisis, believes were heading into a recession similar to 2008. So do economists at Goldman Sachs, Deutsche Bank, Bank of America, Pacific Investment Management Co., and UBS. While we find ourselves in a place we’ve never been before, we’re also revisiting some financial era lingo like quantitative easing, stimulus spending, and bailout packages.
On March 6th, the federal government appropriated $8.3 billion in emergency funding for state and local health departments to use for hiring and purchasing medical equipment. On March 12th, the Fed announced it would inject $1.5 trillion worth of liquidity into the banking system. On March 18th, the $183 billion Families First Coronavirus Response Act was signed into law requiring paid leave for small-business employees affected by the virus along with tax relief for employers. On March 27th, the president approved CARE (Coronavirus Aid, Relief, and Economic Security), a massive $2 trillion aid package designed to help American workers, small businesses and industries grappling with the disruption and hardship of the economic shutdown.
CNN is now reporting that this level of spending could push federal debt as a share of the economy, “to levels not seen since World War II.” And it still may not be enough. The White House and Congressional Democrats are already considering another round of stimulus as well as a massive infrastructure bill.
In terms of severity and communicability, COVID-19 has been a formidable foe that has stressed world markets, corporations, and financial institutions as well as small businesses, hourly workers, and U.S. households. The hospitality, retail, transportation, and entertainment industries – along with professional sports leagues have all come to a halt resulting in millions of furloughs, scores of layoffs, and a mountain of lost paychecks. Economic disruption is now spreading as fast as the rate of new infections.
The outlook is exasperating and while we’re doing all that we can to safeguard our lives, we must also remember to protect our retirement. The coronavirus has triggered an irrefutable and irreversible demand for gold and silver and as one analyst states, “There’s no putting the genie back in the bottle, an unprecedented shift to precious metals has begun.”