Life Beyond the 2020 Shockwave

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Life Beyond the 2020 Shockwave

Once every few decades Americans are hit by a shockwave.  And a few of these shockwaves including the battles at Lexington and Concord, the attack on Fort Sumpter, the attack on Pearl Harbor and the recent biological assault from China, end up being far more consequential than the others.  Why? As with avalanches or earthquakes, relatively small shocks at the right time and place suddenly unleash mammoth forces built up over decades. For example, unlike prior pandemics, this one lies at the unique convergence of geopolitical, technological, and demographic threats and opportunities. 

As we explained in the March 2020 issue, the COVID19 crisis is an event, unlike anything that Americans have faced in at least 80 years.  Prior to the end of February, consumer confidence and business confidence were high; the economy was accelerating; stock indexes were at all-time highs, and the unemployment rate was at the lowest levels in over fifty years.  Then suddenly, international travel bans were imposed, and social distancing became mandatory.  The government began telling “non-essential” businesses to close and demanding that almost everyone else work from home. 

In just nine weeks, nearly 40 million Americans filed for unemployment.  Meanwhile, continuing claims rose from roughly two million to nearly twenty-five million.

Investors, consumers, managers, and governments were caught off-guard, largely because of misleading signals from China and the World Health Organization.  Because of the uncertainty, the S&P 500 index fell 34% from February 20 to March 23.  And the media contributed to the panic by publicizing wildly inaccurate statistical models that experts and politicians are now rushing to disavow.

On March 22, the Trends editors conducted a video Town Hall explaining that Americans were caught in an irrational frenzy based on a misunderstanding of the pandemic’s implications.  We went on to show that everything from “historic precedents” to “insider buying,” to fiscal and monetary policy indicated that “a market bottom was at hand.”  Not unexpectedly, the S&P 500 index bottomed the very next day and, through May 27, rose roughly 32%...

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