The 2020 Kaboom: We Are Now In The Pre-Eclipse Zone of Unknow-Unknowns Between Now And June 21st

Known-Knowns:

COVID-19 both spreads easily, has a much higher fatality rate than the flu and is sufficiently harmful to the general population enough to require countries to limit economic activity dramatically in order to contain the virus before it overwhelms their health care systems.

Central Bank Policymakers have responded by providing large scale fiscal and monetary stimulus in the hopes of preventing a deflationary collapse of asset prices in the markets and collapse in TBTF banks and corporations during the outbreak.

Medical researchers are working on improved therapeutic treatments as well as vaccines. Testing is becoming faster and more widespread.

Known-Unknowns:

The exact duration of national lockdowns around the world and their impact on the exchange markets and the global economy.

The pace of economic recovery once the immediate danger has passed with the possibility of a 3rd wave virus reinfection during a restart.

The size and timing of further fiscal/monetary stimulus with respect to state budgets, etc.

The mortgage finance system could collapse if the Fed doesn’t step in with emergency loans tooffset a coming wave of missed payments from borrowers crippled by the coronavirus pandemic.

Unknown-Unknowns:

The REAL Inflation Rate over the next 12 months, due to the push-pull of fiscal/monetary stimulus and uncertain consumer/business confidence.

Any change of personal/corporate tax rates to stabilize government deficits (both at national and state levels).

The fiscal implications of tax revenue to local, state, and federal governments do to the IRS issuing a nearly blanket evacuation order to its workforce, starting today. 

The political implications of COVID-19 on the November US general election. Worth noting: President Trump’s latest Gallup approval rating out on March 24th was the highest of his presidency.

The effect of exploding deficit spending around the world on the cost of capital.

How emerging market economies with large dollar-denominated debts (e.g. Turkey) will handle a slow global economic recovery

How the European banking system will deal with a sharp and deep recession in its most vulnerable countries in including Germany.

Just as the Great Recession 2007 – 2009, did lasting damage to Millenial job seekers, will the current global downturn affect those finishing/just out of college right in May?

Note: In periods of crisis, capital markets drive government and Central Bank policy response…🧐