History’s first deliberate lockdown recession — as opposed to the usual accidentally-on-purpose credit squeeze variety — is leaving the economic punditry floundering, weighing the mysteries of epidemiology against the flood of fiscal and monetary stimulus.
And since markets and economists understand money better than germs, and since the money available from central banks is not just mountainous but infinite, they’re going with the optimism of a V-shaped recovery. …
It’s not a credit squeeze, it’s a travel squeeze — not just long travel for holidays and business, but short travel to the theatre or the footy, or out for a meal. But have you noticed something? No big companies have gone broke yet — even Virgin Australia, the only large company to have gone into administration, apparently has a long queue of buyers.
But plenty of small ones have quietly expired, with an apologetic A4 note on the window, and no mention in the media.
If there is a theme in the great lockdown recession, it’s that the losers are mostly small and the winners are mostly big. That’s not 100 per cent true, but it’s a valid generalisation — of the sharemarket as well.
Big business is mostly doing OK, and a lot of small businesses are getting crushed; big investors are buying the market and driving it higher, small investors are out of it, confused and anxious. …
The big winners in the US sharemarket have been Amazon, Apple, Microsoft, Alphabet and Netflix — the so-called FAANGs that were dominant already and now make up an even larger share of the S&P 500.
hat-tip Stephen Neil