From a small northwestern observatory…

Finance and economics generally focused on real estate

Archive for March 26th, 2020

No two recessions are alike… but…

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OK, folks, we are most decidedly in a recession.  The initial jobless claims are like nothing we’ve ever seen before:

Initial Jobless Claims

Goldman Sachs is predicting a total GDP pull-back of 24% in the third quarter, which is unprecedented.  They further expect this to really tank in April, but the red ink should slowly abate after that.  Net for 2020 will be a negative 3.8% GDP.  The service industry will be hit the hardest, but there will also be a housing / construction slow-down, and of course manufacturing will be hit as well.  Since Europe and the US buy lots of stuff, expect the rest of the world to follow suit.

With this, you would expect the markets and real estate to tank, but just the opposite seems to be happening.  The broader indices, and my ACCRE real estate fund, are off their previous lows and trending nicely upward.  It would appear that markets discounted the worst, and are now favorably impressed with the Federal government’s ability to step up to the plate with both fiscal and monetary stimuli.  (Note that most other countries do not have this luxury — China has to sell U.S. bonds, of which they have about $1 Trillion, but can’t really issued bonds of their own to stimulate their economy.)

If Goldman Sachs is right, this will be nasty-bad for a few months, and then should abate by the end of the year.  The 1958 recession is worth studying — particularly as it impacted U.S. social programs, the economy, and the shift in the power structure.

Written by johnkilpatrick

March 26, 2020 at 10:28 am

Posted in Uncategorized

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