Monthly Market Monitor – July 2020

Most Long-Term Trends Have Not Changed

A lot has changed over the last 4 months since the COVID virus started to impact the global economy. Asia was infected first with China at ground zero. Their economy succumbed first with a large part of the country shut down to a degree that can only be accomplished in an authoritarian regime. The rest of Asia responded to the initial outbreak better than the Chinese (and most everywhere else we now know) and generally mitigated the health effects, if not the economic ones. China opened back up first and the rest of Asia has followed suit. Economic recovery in China, appears at least, to be accelerating. The rest of Asia is also recovering but the depth of the downturn was not as great and so neither is the recovery pace.

Europe got it next with concentrations in Italy and Spain. The response across the continent was varied but the results have generally been pretty good and economies are, for now, recovering. France has, surprisingly, led the way with Germany also performing well. The worst-hit countries are still struggling to find their footing but in general, it appears Europe is well on the way to recovery.

Next was the US where the response could be called a lot of things but not “well organized”. Individual states were mostly left to craft their own policies which in a federalist system is probably as it should be, but not ideal for containing a pandemic. With different shutdown periods and different state and local responses, the recovery has arrived but not in a uniform way. Some states such as Texas, Arizona, and Florida are seeing infections rise again, although death rates do not seem to be following suit. That may change in the coming days and weeks, but we really don’t know how this thing will progress. Other states like New York continue to improve but they also took the hardest early hit and had the most drastic response.

Emerging markets, no matter where they are geographically, are being hit hard and struggling to find a minimally effective response. Much has been made of Brazil’s lax response but frankly, I’m not sure there was much that could be done differently except in attitude. They just don’t have the infrastructure or resources to mount a vigorous defense against this virus. That is also true of most of the rest of the developing world. They don’t have the luxury of a big fiscal response either so they can’t really shut down their economies. It will be interesting – and potentially very sad – to see how the virus proceeds in areas where there has been basically no serious medical response. Emerging markets will recover last, I’m sure, but when that will be is anyone’s guess.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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