‘Make no mistake…the pandemic morphed into a Depression-like crisis,’ says UCLA economist, who predicts U.S. economy won’t recover from coronavirus until 2023
“The road to recovery for the U.S. economy from the COVID-19 pandemic could be a very long one, predicts David Shulman, senior economist at UCLA Anderson School of Management in a recently published quarterly research report.
Shulman said the current economic damage created by lockdowns and closures that have been put in place for months goes well beyond a garden-variety economic recession. ‘To call this crisis a recession is a misnomer,’ he warned.
‘Make no mistake, the public health crisis of the pandemic morphed into a depression-like crisis in the economy,’ he wrote. Shulman is forecasting a 42% annual rate of decline in real gross domestic product for the current quarter, which he says will be followed by a so-called ‘Nike swoosh,’ or more gradual recovery “that won’t return the level of output to prior fourth quarter of 2019 peak until early 2023.”
Yahoo Finance/Reuters/Megan Davies
IMF warns markets at risk of correction after run-up
“Markets for stocks and other risky assets could suffer a second swoon if the coronavirus spreads more widely, lockdowns are reimposed or trade tensions surge again, the International Monetary Fund warned on Thursday.
Equity markets tailspinned into bear market territory in record time earlier this year as the virus and related lockdowns pounded sentiment, but they have broadly rallied from their March 23 low. The S&P, which fell 34% in just 23 trading days, has been boosted by central bank support, and is now roughly 10% off its record high.
A ‘disconnect’ between financial markets and economic prospects has emerged, said the report, by Tobias Adrian, Director of the IMF’s Monetary and Capital Markets Department and Fabio Natalucci, a deputy director in the department. That “raises the specter of another correction in risk asset prices,” with valuations across many equity and corporate bond markets ‘stretched.’”
Gold set for third straight weekly gain as virus cases soar
“Gold prices were headed for their third consecutive weekly gain on worries about rising global cases of the novel coronavirus, although prices see-sawed on Friday after a firm dollar and a gain in equities countered safe-haven demand.
Spot gold was steady at $1,760.73 per ounce as of 0339 GMT. The bullion has risen more than 1% so far this week, with prices scaling a near eight-year high of $1,779.06 on Wednesday. U.S. gold futures rose 0.2% to $1,770.90.
‘The amount of money pumped in by governments definitely supports gold as a safe haven with this COVID-19 situation still around,’ said Brian Lan, managing director at Singapore dealer GoldSilver Central, amid low interest rates globally.
But gold is seeing some profit-taking after almost reaching the $1,780 mark due to the overall strength of the dollar and stocks, Lan added.”
Higher gold prices will continue as long as Covid-19 does
“The fundamental factors which have taken gold pricing from $1460 in March, to within four dollars of $1800 per ounce this week are still present, and they continue to be highly supportive of gold prices. First and foremost, and at the root of other fundamental issues is the global Covid – 19 pandemic which is now in its fourth month. In that short period of time the total number of reported cases globally has swelled to 9,649,299, resulting in the loss of 487,800 souls.
The pandemic resulted in businesses globally shutting down as countries went into a lockdown mode to slow the spread of the virus. This lockdown led to a massive global unemployment rate. In the United States as of June 22nd 33 states still have double digit unemployment rates. Even with a fractional improvement from the April unemployment rate of 14.7%, the unemployment numbers for May were a staggering 13.3%. The number of individuals unemployed in the United States is approximately 30 million, leaving one out of ten Americans jobless.
The U.S. Treasury Department has allocated roughly $3 trillion in aid through the “CARES Act”. The Federal Reserve took interest rates to near zero and simultaneously infused liquidity into the economy through a monetary policy of quantitative easing and added $3 trillion to their balance sheets as they purchased mortgage-backed securities, U.S. treasuries and now corporate bonds. These actions are not isolated as many other central banks including the European Central Bank have implemented extremely accommodative monetary policies.”