Panic, suffering, economic shutdown, unemployment... The current pandemic has a long list of pessimistic outcomes, but when the wave of panic will fade away, and nations will start reasoning, a solution will be envisaged. How will the world after and its subsequent economy look like?
Data published last week by the US Department of Labour showed that the number of initial claims soared to 3.2 million. It represents a historical peak, the previous peak being observed in the 1980s. Most of YouTube vloggers you watch, influencers you follow, Instagram models you aspire to, or other Kardashianesque characters are most-likely amongst the unemployment benefit claimers. The world will recover after this crisis, but will not go back to what we once knew. Selfies from Pattaya, Instastories from Burj-al-Arab and Snaps with Lamborghinis may become distant souvenirs.
The current economic stoppage is consumerism's biggest enemy. Without consumerism, banks may need to reinvent their business models and to do what they are supposed to: finance the real economy. Indeed, we may witness a strong wave of reindustrialisation in western economies, which are depending at an overwhelming extent on Chinese means of production.
Therefore, the shape of the post-pandemic economy could be massively remodelled and may constitute the end for some and beginning for others.
A large-scale machine industry that is also capable of reorganising agriculture is the only material basis that is possible for socialism. (Lenin, "Theses for the Report on Tactics at the 3rd Congress of the Communist International")
The stock market rebounded miraculously after the US government, along with other leaders of big economies, deployed the heavy artillery to bailout the frozen economy. The market rallied a few days before United States President Donald Trump signed a massive 2.2 trillion USD economic rescue bill to help lift the US economy devastated by the spread of Covid-19. The size of the rescue bill is not the only premiere. It is the first time since Trump came in the White House, Democrats and Republicans joined forces to do something for the people.
In the long run, compared to the 2009 levels, the stock market is still in positive territory.
Many analysts foresee already a “V” shape recovery, but before talking about a recovery, we need to pass over the bottom of the valley. The stimulus brought confidence in the market. But, it did not bring momentum. We would be able to talk about recovery when we know about how long the lockdown will last and how dramatic will be the spread of the disease in the US. Until then, all bets are off.
Gold price shows outstanding resilience to the current crisis. The other precious metals including Silver and Platinum lost significant territory since early March. Nevertheless, this holds true for the paper market. In the physical market, dealers report a surge in demand and a foreseeable shortage of silver.
Seemingly, the coupling of futures and physical precious metal markets is a plausible scenario. Indeed, physical silver is a safe-haven in period of extreme crisis, thereby a surge in silver demand being highly probable in the near future.
Over the last 10 days two signs of hope resurge in the news: The name of Professor Didier Raoult and the miracle treatment consisting in the association of Hydroxychloroquine and Azithromycin. One of the biggest producers of Chloroquine is the Indian company Cadila Healthcare, listed on the New York Stock Exchange. Cadila share rallied last week amid rumours that the Centers for Disease Control and Prevention will approve the mass usage of the chloroquine. Nevertheless, the stock price remained stable since the beginning of the crisis and has better perspective than the S&P 500.
Our prognosis for the stock market is still bearish despite last week’s rally. A second dip could come in the next two weeks and the Dow Jones may go deep beyond the 20,000 support level. As we forecasted, the Brent reached the 25 USD level and will continue to move in negative territory until June.
The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial in- strument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.