Due to the COVID-19 pandemic black swan, we’re now dealing with a significant global recession. The duration is the most important factor. An interruption is hugely less damaging than a permanent shrinkage in the economy; a V-shaped crash and recovery would be the best outcome.
Moody’s Analytics, just as an example, is predicting an 18% drop on an annualized basis, for GDP in the second quarter. That’s horrible, we’ve not seen that in many a decade. However, what’s important to us as investors (a well as producers and consumers in the economy more generally) is how long this is going to last for. Moody’s, again, is predicting a couple of percentage points decline in GDP for the whole year. That, obviously enough, means they’re predicting a significant recovery in Q3 and 4. Not quite back to our starting point but close to it… Sure, we’ll not enjoy neither the trip nor the return to being poorer at the end of the year than we were at the beginning. But a couple of percentage points of GDP is merely uncomfortable, it’s not a disaster.
China is where this all started and they’re a couple of months ahead of everywhere else… Yes, yes, yes, full recovery will take longer but China has already turned that all important corner. It seems reasonable enough to think that much the same will happen to us.
We might well think – largely because there’s truth to the thought – that what the Chinese government tells us isn’t something we want to believe without checking… However, we’ve another entirely private sector measure we can use. Apple has near all of its manufacturing in China. The country is also a major market for its products. Finally, the company cannot be browbeaten by anyone in China into stating untruths. It’s too big for any of that sort of pressure to work. So, we can use what we can glean about Apple’s operations to see what has been and is happening.
MacDailyNews Take: Here’s to a quick strong recovery from this global recession in all aspects, starting with afflicted people’s health and extending to employment and the economy!