The damage to the real economy is certainly baked in. Global depression as well but the question remains, "For how long?" I'm actually a bit surprised that the unemployment numbers weren't worse. E.g., there are just north of 15M employees in the restaurant industry alone and though they won't all show up in the stats a substantial portion of them will before this is over. Across all non-critical sectors the numbers will be staggering. If early reports on the Senate bill are accurate it'll help as it apparently includes up to $1M in loans per small business that will be forgiven if they're used to keep employees on the payroll (up to 2.5x monthly payroll) plus deferral of payment of payroll taxes until next year. Those won't solve small business' problems but they're more than I expected if true.
I'm still worried about the credit markets. Tom Barrack of Colony Capital has a
pretty good take on one aspect of the problem (like many others in this country it's regulatory). The Fed, as they did last time, has done yeoman's work propping the financial system up but they're not remotely out of the woods yet. How do we know? Well one data point comes from the FDIC who, in the midst of a liquidity crisis that has morphed into a financial crisis amidst the most significant meltdown of the real economy in a century all while we're enjoying a global pandemic, is telling us,
"Don't take your money out of the bank. Don't stuff it in your mattress, it's not safe there." In light of that you can bet the only safe place for your cash is in your mattress. On a personal note I called early Monday to change a number of sweep accounts from "government" MM to "treasury" MM. Usually the option is available online but it wasn't. Usually the trade shows up immediately and the position changes after close, it took until Wednesday evening. Usually the front-line folks can do garden-variety moves, she had to speak with a supervisor. That tells me that the Fed likely hasn't even stabilized the MMs yet despite a couple weeks plus of trying. The difference between the two is ~40% agency MBS exposure in the former, just the sort of thing Barrack discussed above.
Even in the worst markets
there are substantial rallies that provide folks who didn't exit chances to re-evaluate. So far the S&P has been down what, 36% from the recent top, and up just under 18% from the recent bottom. Heck, even a simple
reversion to mean argues for the S&P to fall into the 1200-1300 range and, from a pure mean-reversion perspective, we'd expect it to go substantially lower in these sorts of extraordinary times. If things are as bad as we believe in the real economy we could hit historic norms below trend and see mid-500s. Will we given all that new liquidity sloshing around the global financial system? I seriously doubt it, there's just too much money chasing too few assets. I do expect this cycle in the markets to be rather extraordinarily compressed though, things are moving at incredible speed.
Re: cheap shit from China. Sure. I used to sit at a desk in the Silicon Valley and write code. Everyone around me then, as do many of my friends who still do that sort of thing now, cheered on every new restriction & regulation imposed on businesses that touch & concern physical goods in the name of climate, diversity, the environment, etc., etc., etc. After all the coders, lawyers, accountants and the like produce no physical goods so they have no skin in the game if the regulatory state they cheer on kills blue collar America and moves production to China (or so they thought). To them food comes from the grocery store, clothing from the department store, medications from the pharmacy, fuel from the gas station, cars from the car dealer, electricity from wall outlets, etc. Small businesses in the US, particularly those that produce physical goods, exist in the midst of a constantly-worsening legal and regulatory nightmare. Best case scenario: we trade cheap shit from China for cheap shit from India, Vietnam, Thailand and the like because no one wants what's necessary to repatriate physical industries.