The Coronavirus Pandemic's Impact on the Global Economy

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Wondering how the coronavirus is impacting the global economy?

How about whether or not this pandemic is comparable to any other crisis in history?

Brian Levitt, G

Video Transcript:

Katherine Ross:
The coronavirus pandemic has taken the world by storm and it's shut down society and pretty much taken our economy hostage. Joining me today is Brian Levitt, Global Market Strategist at Invesco. Brian, can you break down the global economic impact that we've seen so far from this pandemic?

Brian Levitt:
Yeah, I mean it's just starting to happen and ultimately it's going to be significant, and unfortunately, what the world has come to find is that a quote, unquote "cure" for the coronavirus is social distancing and isolation.

Brian Levitt:
You think about it, even just using the United States as an example, this is a service-driven economy, it's a consumer-driven economy. Industries such as arts and entertainment, retail, transportation, even mining, are two, two and a half trillion dollars of economic output a year, and so it's meaningful.

Brian Levitt:
I mean, you saw, in China, retail sales fall 20%, industrial production fall 20%. Unfortunately, it's now happening here in the United States and we should expect the economic data to be particularly terrible for a period of time.

Brian Levitt:
The good news is markets troughed well before the economic activity troughed, so the markets are aggressively getting out in front of this, but yeah, it's a pretty disastrous hit to economic output.

Katherine Ross:
In your market commentary, you compared this crisis to other market crises that we've seen in the past, and I'm wondering, for the average investor out there who's looking maybe for a comparison or wondering if there even is one, is there a comparison to any other crisis that we've seen before?

Brian Levitt:
No, I don't think there's a great comparison because we've never seen our government officials actively ask us to not engage in economic activity. So the economic decline is going to be worse than that, even what we saw in 2008 and 2009, which was of course the financial crisis.

Brian Levitt:
The good news is that we came into this with the health of the banks in good shape, household balance sheets in good shape, and investors not overly exuberant on equity. So we came into it from a pretty good starting point.

Brian Levitt:
I think to the extent that you use '08 or '09 as an example is, is not to say that the depths of the downturn are going to be similar. This decline in economic activity is going to be worse, but we take solace in the fact that the banking system is better positioned and we now know that the government is going to step in to continue to provide support to this economy. You're seeing it on the monetary side and on the fiscal side.

Brian Levitt:
So it's not an apples to apples comparison, but it's certainly something that's relevant for investors as they think through what the ultimate trajectory of markets may be.

Katherine Ross:
Let's talk about six months from now. Do you have any idea of where we could be economically?

Brian Levitt:
Well, what you hope is that you start to see some of the pent up demand get back into the system. Now, none of us can say that with certainty, not even the epidemiologists can say that with certainty. We have to know when the number of new cases peak. The first bit of good news I've seen in a while was when we saw new cases in Italy start to slow a little bit on Sunday and Monday. I can't emphasize enough how important that is, so that we can start to get back, engaging into the broader economy.

Brian Levitt:
Now, look, I know we're all sitting here debating what level recovery is this, is it V, is it W, is it L, is it U? I mean, a lot of that is going to depend how quickly we can move beyond this and how much we can help to bridge support to small businesses and households. I don't think we could have a robust recovery on this, given the extent of increase in unemployment that we're likely to see.

Brian Levitt:
But we will get through this. The medical community will ultimately get out ahead of this. Monetary policymakers are all in, supporting the functioning of the financial systems. It appears as if Congress is all in to provide fiscal stimulus to bridge support.

Brian Levitt:
I don't think we should expect a robust recovery, but in many ways for the financial markets, it might not matter. The stock market is going to be looking for signs of optimism and that things are getting better. Importantly, things don't need to be good for the markets, they need to be getting better.

Katherine Ross:
Brian, thank you so much for taking the time to join us today, and for more on the markets, please head on over to thestreet.com.