Bassanese Bites: Lockdown – March 23 2020
The combination of rising COVID-19 cases and restrictive government policy responses in the United States were the main global market focus last week, and which understandably pushed equity markets lower. California and New York are now in effective lock down, meaning citizens are ordered to stay in their homes unless seeking food or medical attention. Against this backdrop, US fiscal and monetary policies – which have been extensive – are hardly relevant.
In short, this drawn out horror movie – the opening scenes of which first began in Wuhan, China – with tension building as Europe got affected – is now at least perhaps reaching its climax in that the ultimate draconian policy – lock down – has finally arrived in the world’s most important economy. If there’s any upside here, it’s that in terms of policy responses and countries affected, it can’t get much worse.
The key now is when such draconian policies succeed in “flattening the curve” outside of Asia, given that countries such as China, Korea and Singapore have already had good success in this regard. Given it moved earlier than most, a leading indicator might be Italy. Once there are signs that (albeit imperfect) lock down policies are working, markets may well be able to stabilise – and might even be able to look through the shockingly bad economic data we all know is coming.
