Rockafeler Report: Weekly Economic Report

It was an existentially punishing week. The markets worst fears have been realized -the coronavirus epidemic is a material risk to the global economy. $ 3.6 trillion wiped off in stock market value in the global financial carnage. With the first cases of the Covid-19 coronavirus in disparate countries from Nigeria, Mexico, Iceland to New Zealand, the question is no longer if this will affect global growth and corporate earnings -but how much. With 82,300 people infected globally, and 2804 dead, the question is how deep the impact will be. Uncertainty drives concern. Both are holding markets hostage. In an alarming development, the Coronavirus is spreading faster in South Korea than in China. There is a total of 1766 cases in South Korea, with 505 new cases reported in the last 24 hours. Markets will now grapple with how to mitigate the effects on the global economy.

 The disruption to global supply chains is a real and present danger to corporate earnings. The globalization of the coronavirus will trigger a cascade of corporate earning downgrades. The U.S economy is the largest and best positioned among the Group of 20 countries to withstand the effects of the near pandemic. The American economy, however, is also vulnerable. The coronavirus represents something unique. It’s a true Black Swan moment of a non-financial exogenous element whose impact tithe global economy cannot be quantified.

The Dow Jones Industrial Average dropped 3500 points or 12%. That culminated the Dow’s worst month since 2009. All 100 of the S&P500’s sector has fallen into negative territory. About 95% of the stocks in the broad index are now down more than 10% from their highs. Panicked investors fled to safe havens like government bonds, pushing the yield on the 10-year Treasury-a benchmark of global finance to a record low of 1.127%. That was its largest weekly decline since December 2008. The two-year yield which typically moves in tandem with expectations for central bank policy, slid 0.878%. That was its largest one-week decline since September 2001. In a sign of pronounced anxiety, the Cboe Volatility Index or VIX spiked to 40.11, the highest mark since August 2015. Stock markets across the globe plunged. The Stox Europe 600, plunged 12%, its biggest one week drop since October 2008 . The Japan’s Nikkei 225 fell nearly 10%, its worst since 2016. South Korea’s Kospi had its worst week since 2011, losing 8.1%. The Hang Seng shaved lost 4.3%. To calm financial markets Fed Chairman Jerome Powell signaled he is willing to slash rates to protect the economy from a deepening global slowdown

Europe’s growth is limping along. China’s first quarter GDP will be negative. Growth in America has been sturdy, but no one escapes unscathed in a global economy. U.S. consumers account for two-thirds of American GDP. If consumers pull back the ensuing results will exert a significant negative impact on the American economy going into an election year.

Lost amid the weeks global financial dystopia was an important moment in the war on terror. The U.S. and the Taliban signed a landmark agreement in Doha, Qatar. It officially ended America’s longest war. It lasted 18 years, cost nearly $2 trillion, claimed the lives of many Americans , and hundreds of thousands of lives overseas.