"What we are seeing now is three crises coming together at the same time. First, there's the worst global pandemic since 1918, bigger than the Hong Kong flu pandemic of 1968 or anything else in the last 100 years. Then, there is the worst economic hit since the Great Depression, not as severe yet as that episode but certainly deeper than anything in the post World War 2 period. And finally, we are seeing protests that, in time, could rival 1968. I have also compared this moment to the 1932 March of the Veterans Bonus Army.
I am reminded of this: The 1932 March of the Veterans Bonus Army https://t.co/bWmYIE2pMW "On the morning of July 28, 1932, President Hoover... ordered his Secretary of War Patrick J. Hurley to clear the Bonus Army camps and disperse the protesters." — Edward Harrison (@edwardnh) June 1, 2020None of these crises in isolation is as severe as the historical parallels. But, the fact that they are all happening at the same time, against a backdrop of a new Cold War between China and the United States, will make this a challenging time economically, and consequently, challenging for asset markets too.
Right now, equity markets are trading on thin volume, buoyed by passive investment and algorithmic computer trading. The economic data have turned up and that has put a floor under equities at least. As a result, investors are looking through the recent horrific economic numbers, waiting for a longer-term view once the uncertainty of lockdown and the re-opening passes.
I think the reckoning is in the Fall then. The summer holiday season will be over. And minds will be focused on the future. By that time, we will have enough data to process what's happened and start to make a long-term projection of where we're headed economically."