HOLD ONTO GOLD IN TIME OF UNCERTAINTY
On June 16, 2020, Federal Reserve Chairman Jerome Powell warned at the Senate Hearing that “U.S. Economy Faces Deep Downturn With Significant Uncertainty. Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it.” Until public regain confidence, economic recovery from pandemic is uncertain and the Fed does not expect a quick recovery. While there are signs that the US is bouncing back from the worst pandemic impact, there’s still a long way to go. “If not contained and reversed, the downturn could further widen gap in economic well-being that the long expansion had made some progress in closing.”, Powell said.
Sources: Forbes, Bloomberg, Fox Business, Yahoo Finance
The Corona Virus outbreak in early 2020 suddenly shut down many businesses. Subsequently Gross Domestic Product (GDP) along with US economy has shrunk 5% in the first quarter of 2020. As of July, 2020, there are over 12 million confirmed cases and 500k deaths globally and the rates are increasing daily. Currently, there is no vaccine to cure Corona virus disease (COVID-19). So far, doctors are treating COVID-19 patients at their best guess. It may take years to develop a vaccine and it reaches the entire global population. Uncertainty in health and economy sectors would continue before vaccine is found.
Sources: U.S. Bureau of Economic Analysis (BEA), W.H.O, CDC
The sudden shutdowns of businesses had caused epic damage to the US job market. Eventually, many of these businesses begin to reopen slowly or partially. But for some business, shutdowns and job losses can be permanent and some laid-off workers may never come back. As of June, 2020, Government reports showed the U.S. unemployment number climbed to 42 millions. May unemployment rate 14.7% is the highest since the Great Depression during 1930s (25.6%). Grim picture of the job market is widespread uncertainty and economic analysts believe it could take years to recover.
Sources: U.S. Bureau of Labor Statistics, Fox Business
Nationwide Civil unrest and looting across the US could cause negative impact to markets and the US economic recovery. Because continued civil unrest could threaten consumer confidence and slow down the trajectory of the business reopening. As cities and states have embarked on some stage of reopening from Corona pandemic shutdown, unrest will add a whole new level of uncertainty. The deterioration in consumer spending is susceptible Downside Risks to U.S. GDP growth. If GDP number continues to go down instead of going up for a period of at least six months, then recession is on the way, most experts agree.
Sources: Civil unrest & economy
There is no guarantee that the stock market strength, rebound and surge will last forever, especially when economic prospects don’t materialize, experts said. COVID-19 Pandemic shutdown the NYSE stock market’s trading floor on March 20, 2020 as while stock prices were plummeting. On March 16, 2020, the Dow Jones hit a new record Low with 12.93% Free-Fall, closing at 20,188.52. (Losing 2,997.10 points). The brewing trade tensions between the US and China and Covid-19 Pandemic could have become negative catalysts for volatile stock markets, heightening economic uncertainty, according to industry watchers.
Sources: WSJ, NYSE, Forbes, Bloomberg
STOCK MARKET VOLATILITY