The current situation Covid19
The current situation: Covid19
The global outbreak of the Covid-19 virus has had a remarkable impact on our community and although its great destruction to our communities health and impact to our daily lives is of utmost concern and importance, I want to also address its current impact on our economy and what this means for the future.
I myself in isolation have taken the time to keep a close watch on the impact the period has had on the markets. Last week marked the worst period for Wall Street since 2008 as stock markets went down on average by 40% since their last peak.
For most industries, these decreases and negative impacts can be largely attributed to the social distancing measures that are put in place as safety precautions to reduce the spread of the virus. The disappointment of large group activity bans such as sports events, cruises, festivals, weddings among many others, are necessary to protect public health. I say this because any industry that involves human gathering is inevitably negatively impacted.
According to The New York Times, more than 150 million Americans in over 16 states were ordered to stay home and many states mandated non-essential businesses to shut down. In just a ten day period, over 47,000 businesses have shut down.
We can agree that human safety trumps business performance during this horrific period and I want to focus on what is in our control, how we can stay aware and prepared to come face-to-face with a new economic environment. In order to brace ourselves for the adaptation we will soon face, let us take a close look at some of the impacts of the crisis and the outlooks the experts are sharing. I will then share some suggestions for crisis management and invite you to reflect and do the same, as a community we can make a difference.
“Life is 10% what happens to us and 90% how we react to it.” –Dennis P. Kimbro.
Overview of impact on industries
Restaurant and hospitality industries
Hotels, retail and restaurants are now closed and 5-10% of their workforce is already unemployed. The restaurant business will be one of the most heavily impacted. To give you an idea of the magnitude of this business, California, which has the largest restaurant industry business in the US garners an average of seventy billion US dollars annually.
Consumer product industries
Countries like Italy, deeply impacted by the coronavirus, are pushing for national shutdown until July 2020. The global outlook of the timeline for re-opening of business operations is still uncertain but regardless, with manufacturing lines being shut down for periods this long, the decrease in productivity levels will have an unimaginably detrimental effect on meeting demands for supply post crisis.
The NBA was the first professional sports league in the United States to suspend its season with 259 games left in the season, which resulted in a revenue loss estimated between 350 and 450 million U.S. dollars. This is one amongst many entertainment games or conferences whose cancellations, I must add, have a huge economic impact on the TV industry who relies largely on the streaming revenue of these popular events.
The European Center for Medium-Range Weather Forecasts (ECMWF) reported that in the period between March 1st through March 23rd, they saw a world-wide 42% decrease in weather data reports coming from aircrafts, a statistic that highlights the immense decrease in travel.
Current Economic Outlooks & Statistics
Ray Dalio, founder and co-chairman of Bridgewater and one of the most notable and respected investors, warned about the current economic downturn and recently communicated some noteworthy insights about the current crisis and its impact. During his interview with CNBC, Ray mentions that the Fed’s quick rate cut solution will leave the central bank incapable of successfully stimulating the economy. Additionally, he mentioned that the staggering impact of this downturn is estimated to be that of at least 20 trillion USD. (source: Ray Dalio on CNBC)
Economic forecasters predict that the annual US GDP growth rate in the second quarter of 2020 will be at best -8% while others with a less optimistic outlook predict a rate as low as -15%. (source: Fortune).
The below GDP forecast data provided by Goldman Sachs, suggests one of the most unpromising outlooks on Wall Street for the recession that is upon us. The data suggests that activity will recede by 6% by the end of current Q1, followed by a staggering 24% decline during the subsequent Q2.
Preparing for an uncertain future
Preparing for an uncertain future: post-covid19
I want to note that though important to share the above statistics and outlooks, there is a current unprecedented level of unpredictability making it very difficult to display 100% credible and realistic forecasting. However uncertain, we must never ignore that the situation is grave and the future at risk.
Actions by the government are being put in place although uncertainty is also a factor for them. to-date, the Fed cut rates to almost 0% and the US government is currently putting into place trillions of dollars for stimulus plans to avoid massive unemployment, financial collapse and to avoid what is now commonly being referred to as another great depression.
Markets love predictability for a reason, but at a time like this where predictability is out of our control, the best we can do is stay aware of what experts are suggesting based on experience and take into account the data from the most credible sources. I encourage all my readers to head the warnings and not take the situation lightly. Stay curious, stay aware and updated on daily market activity, read but question suggestions, question your sources of information, practice adaptability, practice problem solving by shifting to an entrepreneurial mindset (what would you do?). It is incredibly tough to see the bright side of such a horrific period for humanity, but it has been an incredible moment of learning for me.
By nature, I am a very optimistic person and I believe our future will be brighter and that from enduring hard times we come out stronger as individuals and as a society. Even if the duration of this emergency is unknown, I can already see some opportunities emerging for us both as humans and as a society. Below are some thoughts looking forward to inspiring our community and hearing your reflections for our future as well!
History repeats itself: investment opportunities in times of crisis
The following companies were founded between 2008 & 2009 during the financial crisis: Airbnb, Cloudflare, Github, Pinterest, Slack, Square, Stripe, Uber and Whatsapp. If you stopped investing at that time, you missed out on an opportunity to profit from the best and most defining companies of the last decade.
Time is a gift
“There are not enough hours in the day” is no longer a roadblock. You are being given one of the best gifts life has to offer…TIME! Don’t waste it and use it wisely as this opportunity is a rare one. What you chose to do in this time can shape your future.
Benefits of alone time
Finding happiness takes self-discovery and self-awareness, finding love requires loving yourself first. These things take “alone time” and now is the perfect opportunity for self-reflection. Fall in love with yourself, get to know yourself, spend time with your thoughts, and challenge yourself, your goals, and your present. Become better and brace to present this better version of yourself in the world.
Working from home: opportunity for new solutions
Traditional organizational hierarchies, traditional businesses need to switch a new, fast, tech-driven communication mode. Our ecosystem is rapidly changing – don’t drag behind! Create! Innovate! Be at the forefront of this online movement. If you think it, implement it!
Social Responsibility: *a human life is worth more than any amount of lost revenue*
Now is the time for Capitalist players to display authentic efforts in social responsibility. Political leaders, financial institutions and global governance structures struggle garnering trust from the community. The private sector needs to join the front line on this fight. Bigger involvement in social missions can drive stronger financial performances.
Many successful entrepreneurs are already taking action. One of the world’s biggest entrepreneur and innovator, Bill Gates, resigned from the board of Microsoft last week and is now effectively a full-time philanthropist. The Bill and Melinda Gates Foundation has contributed $100 million for programs to fund testing and science around the pandemic. “The economic effect of this is really dramatic. Nothing like this has ever happened to the economy in our lifetimes,” Gates said. “But bringing the economy back … that’s more of a reversible thing than bringing people back to life. So we’re going to take the pain in the economic dimension — huge pain — in order to minimize the pain in the diseases-and-death dimension.”Bill Gates
Some final thoughts…
Faced with unforeseen circumstances, a change of mindset is necessary in dealing with this crisis. As history has shown repeatedly, in time of distress, war and crisis, humanity’s reaction dictates our comeback and survival. Although the situation at hand is not in our control, let us take the gift of time, as mentioned in one of my insights, and instead of going into panic mode, focus our time and attention on those things we can control.
Whether that be personal or for the community, use your time wisely, be encouraged to share opinions, insights and nuances with your loved ones and community.
Regardless of accepting a lack of control over this pandemic, as long as we stay proactive, together we can make a difference in our community’s resilience and outlook towards the future.