This is fuelled by cheap money provided by governments worldwide and, since shortly, by hopes of easing lockdown restrictions
At the same time, we see news from companies that go bankrupt, beg for government support, suspend dividends and review or cancel their outlook for the next coming months/year.
There is a clear disconnect between the realistic expectations of the economy and the rise of the stock exchanges.
I fear that we will see reality catching up with false hopes.
We currently need 70% of the oil we used to consume. Oil consumption is a good indicator of economic activity. 30% less means roughly 30% less activity, production, sales, profits in the overall economy.
This crisis is driven by a heavy demand side decline: People don’t buy, companies don’t invest and lower production. Companies go bust, individuals face bankruptcy. Who is buying a new car now? Sales are down 30%. Millions become unemployed.
This 30% figure seems to apply throughout and stock exchanges will eventually also go down to reflect this.
Some sectors will be or are already very hard hit. Think of tourism, hospitality, airlines. Transportation, automotive, mining, insurance (less to insure, more claims), banks (defaulting loans), steel and construction (who builds anything?).
Some are winners. Think of supermarkets (we all eat at home), home electronics (upgrading the home office), DIY markets, streaming movies, storing oil (waiting for higher prices).
The 30% applies to these current months. If we manage to unlock the lockdowns quickly (science and statistics leading the way), we may be only 10 or 20% off for the whole year 2020. But we will be off!
Not a complete list, just my maturing thoughts.
How are you coping?