At the risk of sounding really stupid in a few weeks or months, I’m going to predict what will happen to the economy and stock market for the rest of 2020.
1) The lock-downs seen in USA will ease by May 2020.
By that time, cases may still not have come down. The cases in the USA are still rising, mostly because test kits have only become available in meaningful numbers recently. It could get exponentially worse.
But the American economy is having a heart attack now. The streets are deserted, and revenue for many service industries have disappeared overnight. It’s become apparent that hundreds of thousands of workers and businesses there live pay-cheque to pay-cheque, and cannot survive even 1 month of no income. Unless restrictions are quickly lifted, millions more will lose their livelihood.
Americans greatly value their freedom, and while many will accept a couple of weeks of quarantine, they won’t accept months of it. Many won’t be able to feed their families, and there will be social unrest. The US government must let businesses regain some semblance of normalcy. It can be balanced with the health system.
I would never count out the Americans and their ability. I don’t believe they will be in a panic or hysteria for an extended period of time. The indefinite lock-downs will be replaced by more sensible practices and people will slowly start going out again. We in Singapore experienced panic too, and I think we are a much more fearful people. But even we do not lock ourselves up for weeks and months.
2) Biden will win if Trump doesn’t get the economy and stock market on track by latest Oct 2020.
I’m ambivalent on who I would want to win the US presidential election, which must take place by Nov 2020. Just as long as the candidate is able to grow the US economy, which is good for the rest of the world. Despite his many flaws, Trump has managed to do that, and not blow up the world. But now, all the gains have been given back.
I used to think that Trump was a shoo-in for re-election, with the strong economy and a gaffe-prone democratic candidate (check out the videos of him touching). But due to the corona-virus situation, Trump is very vulnerable. Unless virus cases come down and millions regain their jobs, he has no chance. You can bet that he will do everything in his power to get the American economy working again.
3) Amazon will do well
So the Trump administration is planning to send $1,000 cheques to their citizens, about $500 billion in total. My guess where most of that will end up is in basic necessities like groceries, utilities, and rent.
I have been buying Amazon stock last week. It’s a small amount, just 4 shares (which is already down 4%). Amazon is like the stock made for people to stay home as much as possible:
- Online shopping. It includes fresh foods and groceries. They have already run out of capacity to send non-essential goods.
- Twitch. Video gaming and streaming are up
- Amazon web services. Cloud computing, which should be up given the amount of people now working from home, and businesses cutting costs.
I don’t know if these will actually translate into a higher stock price though. More business does not always translate into that. But I do know that Amazon is one of the few businesses will do better in this situation, and that’s good enough for me. The virus situation also changed American consumer habits to do more online, and much of it is likely to be permanent.
4) Travel and related industries will be very subdued for 6 months – 1 year.
My wife and I, we won’t consider travel till minimally the end of the year. I suspect millions more think the same way too.
This will be true even when the number of virus cases start coming down. So hotels, airlines, and other industries that depend on tourism will go through a really tough period for an extended time. It won’t be just a few months.
Cruises have also become a nightmare, a floating sick ward that can be out at sea for weeks, being refused entry everywhere. Maintaining and docking those massive ships have huge running costs too. Their customers and stock prices won’t come back quickly.
So some industries and businesses will do well, and others not so well. That’s why I have resisted buying the SPDR S&P 500 index, which contains everything. This is slightly odd, as I believe buying the index is always safer and does better than stock-picking and timing. But I’m stubborn and there are limited funds to deploy. Better to go with my deep convictions.