It’s always fun to speculate what will happen in the future. Even if I’m wrong, that’s quite normal. At least I took a stand and wasn’t wishy-washy.
This commentary is mainly on the US and economy, as I follow US and international news. US politics is just so interesting. There is a lot of good debate and analysis. I studied in the US for my undergraduate, and I feel familiar with the country.
And in case you haven’t guessed, my whole investing strategy is to buy stocks of companies I like and use e.g. Amazon, Google, and Facebook. It just so happens that they are all American. It’s not because I love America that I buy these stocks though. If they were from China or Norway, I would buy there. I will buy great companies wherever they are.
Lock-downs in the USA will stop by May 2020
Given the prevalence and how easily it infects, I can’t see how COVID-19 can be eradicated until there is a vaccine. As such, the economy cannot wait till there are zero cases to reopen. It’s probably irresponsible to hold it to a zero or near zero case standard, as millions more of livelihoods would be destroyed around the world by then. And then the virus pops up again.
It’s economic suicide to extend lock-downs to more than 2 months. Beyond that, the economy will sink to a point of no return. My guess that the Americans will greatly resist the restrictions on their freedoms was right. Protests against the lock-downs have grown. The political pressure to ease the lock-downs will exceed the desire to prevent more deaths.
I don’t think there will be repeated lock-downs in the USA, even if there is a second wave of COVID-19 cases. Lock-downs were necessary due to lack of preparation and the danger of overwhelming their healthcare sector. The next round they will be much better prepared. There is already an oversupply of ventilators, and I’m sure there will be more wards and masks available.
Trump will win re-election
This is a pretty bold claim, as the mainstream media polls consistently show Biden beating Trump.
But I would heavily discount what the mainstream media says, as they were overwhelmingly wrong about the last US election.
There is also a strong anti-China mood in the USA, which will only increase as 2020 progresses. Trump takes a much harder line against China than Biden. Many Americans love it when he bashes China.
While the economy will likely still recovering in Nov, it will probably be enough for Trump to call it a win. There are also natural advantages to being President while running for re-election. You get more air time and chances to announce big speeches and numbers.
I think Biden is a weak candidate with tons of baggage. He’s been in politics for too long, there will always be things that will come back and haunt him. Trump’s dirt is already long unearthed and it still didn’t matter to voters. In addition, there is some talk that Bernie Sanders’ voters won’t come out to vote for Biden. As with what happened with Clinton, these spurned voters feel cheated and would rather spoil the vote or be apathetic. So the Democrats are split, while Trump has united the Republican party.
USA Economy will Outperform the rest of the World
Assuming that US lock-downs cease in May 2020 and the virus doesn’t mutate, we have probably already seen the worse. The stock market has rallied hard, despite all the bad news. I don’t think sky high unemployment numbers matter a lot to the stock market, and latest job layoffs were 4.4 million, down from the record 6.6 million reported the week before. The early and massive support from the Fed probably saved the markets.
I’m more optimistic on US equities, as there are many more companies which stand to benefit from the post COVID-19 economy e.g. Netflix, Amazon, Microsoft, Johnson & Johnson.
I also think there will be a ton of investment in the USA, as manufacturing comes back. The developed world realises that China cannot be the sole supplier of critical medical equipment. Pretty much everyone is trying to move at least some capacity out. But I don’t China will collapse. The country is just too big and strong. Their stock and bond markets’ resilience has been surprising. The Chinese people are also pretty smart and have incredible capacity and willingness to “eat suffering”. They will do alright.
I’m also bullish on the USD, and will continue to hold most of my assets in it. Some people think that the massive amounts of US dollars being printed will lead to a decline of value in the USD. But every country is printing money too. Relatively speaking, USD should still be more valuable due to its reserve currency and a safe haven status, and demand for the USD should still be strong for the foreseeable future.
So yes, those are my dumb predictions for the rest of 2020. I estimate the chances of me being right have the same probability as thoughts coming from an Harvard economist, or an auntie shopping in Sheng Shiong. It is trying to predict the future after all.