The COVID-19 crisis continues to spread, and there are increasing fears that a full-blown global pandemic could develop. The first signs of the economic fallout arrived last week, with various Asian PMI surveys showing sharp losses, and even the U.S. flash PMI estimate for February weakened markedly. It will be a roller-coaster ride ahead as weak economic data is released, which could raise worries that the global economic expansion may finally be coming to an end.
MRB has just published a report that examined the progress of COVID-19, and noted that although the reported data is of dubious quality, the mathematics of epidemiology are well known and less worrisome than the bearish headlines suggest. Still, until it is clear that the crisis is peaking, expect investors’ nerves to be on edge, especially given that equity and credit markets have so far shown only modest damage.
At this point, we do not expect the global economy to stumble into recession, but be prepared for a volatile, and periodically difficult, next few months.