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Coronavirus, the Economy and Politics

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Coronavirus, the Economy and Politics

Predicting the economy or changes in the economy isn’t simple and straightforward. Economists spend their lives mapping out what’s going to happen to markets and predict the economic future. not unlike giving a daily weather forecast. But it’s never an exact science. Unexpected things can happen that defy even the most seasoned economic and financial expectations.

At its core, predicting the economy is sound exercise and a necessary process. Existing market preconditions are studied and reasonable outcomes that might emerge, based on various indicators such as behavioral finance, market trends, momentum, growth, investment, political events and more, are put forward.

When economic conditions can change over the course of a year, it’s possible these economic forecasts could fall off the mark. Financial and economic experts don’t have absolute powers, a crystal ball they look into for a clear view of the future. It’s guesswork at its simplest; not unlike buying stocks in the stock market, which is essentially the equivalent of placing a bet on the stock market and hoping the bet wins and the rewards are reaped.

Of course, not only can economic and financial experts get this wrong at times but they simply can’t predict the unpredictable, such as an unprecedent global pandemic like the novel coronavirus that is wreaking havoc across the globe, frustrating government, economy, financial markets and the very fabric of modern life.

By many financial forecasts, the end of a dynamic 2019 spelled promise for the start of the New Year.  Of course, there is always some kind of uncertainty. For example, the US Elections presented a political uncertainty for 2020, as did the UK’s Brexit vote, but, despite these unknowns, according to analysts the future looked bright and deserved a celebratory toasting.

For instance, a recession was deemed unlikely then by the Editor of Investopedia Caleb Silver because the “leading economic indicators still had juice in them.” In Silver’s article, ‘2020 Predictions for the Global Economy and Markets,’ he predicted the Federal Reserve is more likely to “raise interest rates rather than cut them” and the global economy “will start to pick up.”

Silver also pointed to the UK as a particular market hot spot “ now that PM Boris Johnson has parliamentary majority. He’ll be opening the vaults to 10 Downing street and spending Great Britain’s way to growth as it Brexits away.”

When looking at the U.S. job market, with particular attention to the services industry, Silver predicted a strong job market, if not as strong as previous years. “The healthiest parts of the economy are in health care and services,” Silver wrote.  “The former is a growing industry. The latter is more unpredictable since services cover everything from transportation to media, financial services and technology. It’s the largest contributor to GDP, but it also represents the shortest cycle businesses.”

Of course, that was then. Before the New Year and before anyone had even heard of the ‘killer bug’ from Wuhan, China, never mind it making its presence felt in each and every country.

Silver did hit the nail on the head somewhat uncannily when as he was referring to the services industry jobs he said, ‘ When the economy weakens, these are the first jobs to go.” Although he couldn’t have imagined that what was clearly an afterthought in his piece would actually happen nor the manner in which it did happen.

This terrible reality has been replicated around the world and not just with the service industry but every “non-essential” job as deemed by governments, prompting record unemployment figures in the United States and around the world.

It’s the worst public health crisis to hit the world in 100 years, bringing with it previously unimaginable lockdowns in every major metropolitan city around the world, extraordinary unemployment everywhere and social change. Governments are emptying out their coffers as they attempt to provide for the public and, at the same time, salvage businesses and industries. And the IMF has come out with apocalyptic figures in recent weeks, warning of untold gloom and doom in the months and possibly years to come.

The worst bit about everything is that nobody knows enough about the deadly virus to give any semblance of reassurance normalcy might return sooner rather than later. Scientists and epidemiologists are learning on the fly, adapting the science daily as new things are discovered. With this kind of uncertainty, it is simply impossible to predict what the future holds and in what shape the global economy is going to be in, never mind how individual countries will hold up.

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