Opening Statement from the May 2020 CCPM Forecaster 

Opening Statement from the May 2020 CCPM Forecaster 

Originally published on May 3, 2020  

Overview

No one alive today has ever witnessed an economic collapse of this magnitude over such a short time span. In just a few weeks we have seen the following: two emergency rate cuts by the Federal Reserve, a $2.2 trillion stimulus package from Washington, $6 trillion in credit facilities created the Fed, a collapse in US Treasury yields to record lows, a collapse in oil prices to negative pricing for the first time ever, the most rapid collapse in the US stock market from record-highs, loss of 30 million jobs in the US, record-low PMI and GDP data for several countries.

As discussed in special webinars held in March (as well as in the Intelligent Investor and Market Forecaster) the impact from the response to COVID-19 is likely to result in a record-low collapse in GDP for many nations. In our view the world has been in recession since mid to late-March. As we stated in April, we believe most economic data from around the globe will be “off the charts.”

For the US, Q1 2020 GDP was recently reported at -4.8 percent. We believe there is a good chance Q2 GDP will surpass the –8.4 percent collapse (final revised data) reported in Q4 2008 (note that the GDP data will be revised for many years before the real numbers are known).

Although not yet reported, it should be apparent that corporate earnings have collapsed. The earnings recession in US stocks ended by Q4 2019 but is guaranteed to resume in Q1 2020 as a result of COVID-19. We have no doubt that Q1 and Q2 S&P 500 earnings will be negative. Estimates for Q3 and Q4 are too difficult to determine at this point. But we do not expect the S&P 500 to record earnings growth for the full 2020 year.

The possibility of a huge wave of corporate bankruptcies is also of major concern. The Fed has attempted to reduce...