Monday, September 21st, 2020

Will the Coronavirus Reshape the Economy?

May 5, 2020 by Jim Walker  
Filed under Options Trading Education

 

After the decade-long bull market collapsed, it recovered about half of its losses. The recovery was based on optimism. The Fed came across with a reduction of interest rates and a gigantic financial easing package. Congress passed a $2 trillion stimulus bill that appears to have avoided some of the corporate and bank handouts that slipped into the one a decade ago. However, the deluge of bad earnings reports has only begun to arrive. A telling blow to the market occurred just the other day when it became known that Warren Buffett and Berkshire Hathaway dumped all of its airline stocks. Buffett’s comment had to do with how these businesses will be changed into the distant future. Will the coronavirus reshape the economy in ways that will destroy previously viable industries? This is a question that both long term investors and short term traders need to consider.

Will the Coronavirus Reshape the Economy?

Market Watch writes about the trap awaiting the stock market in the coming months. The comment is that all of the good news has been squeezed out of the tube of toothpaste!

These bits of good news include “unprecedented stimulus, an inevitable curve flattening in U.S. cases and deaths, reopening plans and optimism over remdesivir clinical trials.”

Summer could bring “hard economic data collapsing like we’ve never seen before, terrible corporate guidance, stories of pending bankruptcies,” and a second wave of layoffs that will hit the white-collar sector, warned McElligott. Rising trade-war rhetoric from the White House as a presidential election campaign heats up could present more risk, he added.

“That’s why I think folks are getting ready to hit the wall again, with this idea we’ve moved out of stabilization and now we’re back into the harsh reality of what this is,” without having a Federal Reserve boost and no more stimulus checks until things get a lot worse, he said.

They look to the fall as a time of recovery of the market as prices will drop again this summer and the coronavirus situation will be clearer if not better.

Which Business Models Will No Longer Work?

In a world where no vaccine is available and no medicine will kill the virus, the pandemic may go on for at least a couple of years. If it mutates and returns, the effects on society could become semi-permanent. This would result in a world where travel is restricted, airlines, cruise lines, travel agencies, and vacation spots will no longer have enough customers to remain in business in their current forms.

If social distancing becomes the norm, restaurants, bars, casinos, and sporting events will all find it hard to make a profit due to their small customer base. When no one can travel by car, plane, train, or bus, the consumption of gasoline and will drop and keep the price of oil down into the distant future.

Online business will likely become increasingly dominant as will those that deliver to do “curbside” service.

Thinking about how the coronavirus will reshape the economy will help traders and investors make the most profitable decisions going forward.

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