The past week was another intense one for the world economy and public health. Before sharing major updates covered by the COVID-19 news tracker, I wanted to share a brief framework for how I’m organizing risk and political analysis around this topic.
When observing major political, economic, and health developments, I split my analysis into news across five time-based categories:
When I read the news, I try to ask myself which time frame the news is affecting, and how this impacts the stakeholders/leaders in the news.
For example, the health emergency associated with COVID-19 focuses on the minutes, hours, days, and weeks... New York City needs to respond as soon as possible; every hour counts.
This is less true for the US stimulus plan. We didn’t need a minute-by-minute response there, and in fact would prefer a well-planned response over days/weeks instead.
Crises that have an impact over shorter timeframes tend to have lower quality of information and fast-changing facts. The quality of information is loooow in the events changing in minutes/hours because few people have time to run any sort of analysis or fact-checking. By the time you’re reading this newsletter, some of the news might be outdated (which is why you should check regularly-updated dashboards); our political leaders might seem wishy-washy because they’re responsible for minute-by-minute decisions and are using low-quality information.
This is important to keep in mind when making your own plans.
Now... On to the news for this past week.
Are we in a recession? Yes. ... and to those that say we're technically not, I’d say you're missing the point.
The biggest financial news this past week was the US CARES act (i.e., the $2 trillion stimulus plan):
Other countries have also passed bills or stimulus plans:
The US-based Tax Foundation is tracking country stimulus plans systematically.
Corporate playbooks are starting to show a pattern: (1) stop paying dividends, (2) increase your access to cash via debt, lines of credit, or other means, and (3) restate earnings projections or simply stop committing to any.
Companies following this playbook include GM ($16B credit facility, 2020 guidance changes), Airbus ($15B credit facility, no more dividend payments), Boeing ($13.8B loan drawdown), Vale ($5B credit line), Orbia ($1B credit line), and many others.
In fact, the FT reports that investment-grade companies took on $244B in debt since March began.
There’s much more news, but the patterns above are becoming clear and hopefully will help guide your own reading and analysis.
Let’s return to the framework I mentioned earlier, and let’s see how major trends and patterns stack up for the coming days, weeks, and longer-term periods. Below are some of the trends I’m monitoring.
This isn’t meant to be an exhaustive list, but more to help you potentially build your own.
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© Chimera Information Systems Inc., 2020