Coronavirus and the world economy

What in the hell is really happening? And what does it mean?

We are still in the early ‘reaction based’ phase of the coronavirus disruption to the financial markets. This could very well be described as ‘the panic phase’. The signs are that we could possibly be at the beginning of the biggest market crash, at least since the 30’s. We do not have to remind you of the huge consequences of that particular financial event.

After the panic phase we may well see the markets ‘bounce’ back, at least slightly. It happened in the 1930’s. Today we may well be witnessing something similar; but, the six month rally seen in 1929 to 1930 was built on a false premise – that things were quickly going to go back to normal. They didn’t.

By 1933 the world economy was in tatters. There was a new ‘normal’ and it wasn’t the same as before. That fact is exactly what we must get used to now.  Things have changed. There is a new normal on the way – and it will be drastically different to before the outbreak.

Some investors think the market has bottomed and are buying in. Are they right? We don’t think so. We suspect these ‘buy-ins’ will be accountable to the investors ‘hope’ that things will soon return to normal; but the signs are they wont. And anyway,  hope alone was never the basis for a good investment.

We believe that after this brief rally the consequences of what is happening now will really hit home and we can expect to see a further, and bigger glut of insolvencies, across nearly every sector of the world economy.

Your absolute number one priority right now as a serious, sophisticated investor should be to financially protect yourself and your families from the economic events that are now unfolding.

The best advice we can give is that you need to get to grips with this new reality, protect yourself from what is coming and ACT when you see investment opportunities. But how? Just take a look at the numbers below.

The economic Facts

Some Grim Reading

Worldwide, this is already undoubtably the biggest financial event of the last 100 years, perhaps even longer.

China has just recorded the largest ever fall in PMI across retail, industrial production, automobile sales, fixed asset investment, everywhere.

In the UK the fall in share prices in 2020 is bigger than any 3 month period since the ‘south sea bubble’ burst in 1720! Bigger than 2008, 1987, bigger than Dunkirk, the 1930’s, and the Napoleonic Wars.

In Germany the ZEW economic growth expectations collapsed. In France we see the same parallels, and in Italy business confidence plummeted faster than ever recorded.

In the States US markt PMI collapsed. US oil has gone into the negative.

We will stop here. You can see the picture. The list goes on and on…

This data is reflected across Asia, Europe and America, – everywhere. We can see the same incredible drop in every macro economic performance indicator. Some analysts think we will see a drop in quarter on quarter GDP of 20% – 30%.

Lets put this in a little context.

• 1970 QoQ GDP -4.2%  |  Market drop: 37%
• 1974 QoQ GDP -4.8%  |  Market drop: 45%
• 1980 QoQ GDP -8.0%  |  Market drop: 27%
• 2001 QoQ GDP -1.7%  |  Market drop: 51%
• 2008 QoQ GDP -8.4%  |  Market drop: 58%

These figures lead to the depressing conclusion that all too many firms, individuals, markets and pensions could all be going to the wall. A sobering thought no? And, one has to concede, at least an all too realistic possibility.

The numbers are hard to ignore. And a little disturbing to say the least.

We will say it again. It’s worth repeating…

“Your absolute number one priority right now is to financially protect yourself and your families from what is coming.

So, the question is where to invest? How to protect your wealth? Where can you still find exceptional returns with the minimum of downside risk? How can you protect your wealth through this extreme volatility?

We have said this before too, but rarely with anymore urgency…

“An intelligent asset allocation that is designed around your risk tolerance and is truly diversified is your best defense against coronavirus market volatility, and it will be your best defense against the next bout of market volatility as well.”

We have some of the solutions. Scroll down for some examples. There are sectors and assets that are still in a promising position. What are they?

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