The world relies upon China as the critical supply chain for the world. They produce 70 to 80% of the world's air-conditioners and cell phones. They supply tools and materials for factories and pharmaceutical companies around the globe. China has been desperate to control the narrative of their homegrown Covid-19 pandemic as they engineer a get back to work effort to save their economy and reputation as the world's most critical supply chain. Perhaps Chinese surveys of Purchasing Managers (PMI) is not obfuscated by Government sensors given the recent report showing the biggest drop on record, even more, pessimistic than the depths of the Great Recession of 2008-2009. When contagion subsides around the Globe there will be a V-shaped recovery, but the unknown duration of this pandemic is increasingly pricing in economic contraction risk and scaring investors.

Another interesting clue about China’s health and claim that the virus is fading, can be gleaned from traffic activity in China. Perhaps not entirely surprising is that the epicenter of the virus outbreak in Wuhan remains a ghost town. The streets of this major city are empty as workers stay home or stay far away, unwilling to return to work in this dead zone.

While some large cities like Shanghai are about two-thirds of the way back to normal business levels, other major cities in China show less than half the normal traffic patterns. This implies that China as a whole is still impaired, even as it claims the virus is subsiding and factories are getting back to full pollution levels once again.

Other than regions with viral outbreaks like Milan or Tokyo, most areas of the world show no signs of fear in local business and consumer activity. However, we can see early signs of how consumers in a relatively safe US react when there is an outbreak. Near Seattle, Washington where 11 or the current 12 deaths in the US have occurred, activity has dropped by almost half as people are staying home. While most cities in the US are still moving around without trepidation, Seattle is a warning of the fear that may arise if this contagion becomes fatal in major cities across the country.

International travel has been severely impaired since February and domestic travel is only mildly affected thus far. The biggest concern is how long Covid-19 endures and how many cities experience fatality spikes that cause the broad economy and stock market to contract much further than is currently being expected. It will be a brief but significant shock if this virus continues to spread through April, but beyond that, the toll could become a Black Swan event with devastating consequences. Normally these contagions breakout in December and burn themselves out near the end of March as the warmer weather pushes people outdoors. We certainly hope this calendar pattern manifests once again this season along with an early arrival of warm weather that truncates further harm, but we continue to encourage watching the trends in S.Korea, Japan and Italy that should provide month ahead forecasts for the US.