Q1 GDP Data Masking The True Global Economic Future?
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Q1 GDP Data Masking The True Global Economic Future?
The total world GDP output was approximately $190 trillion. An estimated 15% to 20% global GDP contraction as a result of the Covid-19 virus event would shave $28.5 to $38.0 trillion right off the top of the 2020 global economic output. Should the global shutdown last through the end of May 2020 (or beyond in some form), we believe the contraction in global GDP could become even more severe.
The complicated issues that arise from this global contraction in GDP also bleed over into supply-side economics. As the world attempts to “shelter in place” to avoid spreading the virus and risking more lives, demand collapses. Once demand collapses enough (resulting in price level collapses as we’ve seen in Oil) the result in production/supply issues becomes even more complicated. Unlike Eggs or Milk, one simply can’t bury or destroy other types of supply. The destruction of certain industries, resources, and capabilities will become very real over time as a result of any extended contraction event. The longer-term results of this type of event are sometimes called “stagflation” – where price levels rise as income and economic output stay moderately flat.
These longer-term economic expectations are key to understanding how the recovery process will create opportunities for skilled traders and investors.
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