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Will the faltering economy lead to a global recession?

During this horrible time for our nation and other nations around the world, the global economy's stock markets are dropping, businesses are shutting down, and major cities, states and countries are shut down. In the United States, the country's largest cities, such as New York, Los Angeles, Boston, San Diego, San Francisco,and Seattle (which was considered the first epicenter for this virus in the USA), are practically locked down. These cities are usually booming with millions of people in them are practically ghost towns with barely anyone on the streets.

Wall Street, the financial capital of the world, has been a roller coaster during this pandemic. "On March 30, 2020, the oil market dropped to an 18 year low," says the Wall Street Journal. Another chilling statement made by the Wall Street Journal is "Stocks are on track for the worst quarter since 2008."

With a statement like that made by one of the world's most followed newspapers, it brought me back to my question which was: Will the faltering economy lead to a global recession?

When the Wall Street Journal mentions 2008 in that sentence I immediately think of the 2008 market crash which was one of the world's worst recessions in our nation's history. Wall Street executives say "There's a lot of uncertainty out there: that alone is a reason to be cautious in markets," said Salaman Baig, a portfolio manager at Swiss Investment firms, one of the largest on Wall Street.

Analysts say the erosion of value in financial markets in recent weeks was exacerbated by factors including not just trading, but also Wall Street hedge funds increased use of computer driven trading models; investors are urgently unwinding risky bets made with other investors borrowed funds; and big asset managers are pushing really hard to divest even the safest assets and hold more cash. Many investors are being very cautious about what they invest in, as the U.S., Europe, and many Asian countries have rolled out very large fiscal stimulus packages to certain firms. This is not going to be permanent but it will be severe and have an impact until the markets globally recover.

Now with the coronavirus pandemic, I wonder if there will be a global recession and the answer to that question is we are pretty much in one right now. Think about it, millions and millions of people all over the U.S. are unemployed, businesses who are deemed non-essential were forced to close and essential businesses were allowed to work, but only if they follow the strict guidelines that were put in order for this crisis.

These circumstances that I just listed are all things that happen during a global recession. Another really big question is how are states being able to afford these circumstances with the guidelines that were put in place? There is pretty much no revenue stream for a lot of them and especially places where the coronavirus is exploding such as New York City and pretty much all of the suburbs to New York and New York State; Fairfield County, CT being one of them.

New York Governor Andrew Cuomo expressed in one of his news conferences that one of the largest states in the country has no revenue and the state is near bankruptcy now. This statement started to get me thinking about not just New York but all the states and even other countries. With little to no revenue in all of the states, which is what is happening right, now a recession will be guaranteed in a situation like this.

Central Banks, led by the Federal Reserve, have been forced into emergency interventions to boost funding in credit markets and promise an adequate supply of U.S. money to ensure the states like New York, who rely a lot on revenue streams, can function as a state. This money will go to all states who are in desperate need of funds.

Earlier last week President Trump had said he wanted to have the country start to recover and have things opened up by April 12th, which is Easter Sunday, but a few days later he said that he would like people to be quarantined - like what is happening now - until April 30. That extends the goal to open things up by 18 days which is a lot of extra time.

A lot of this depends on what is going on in other countries as well. Europe's benchmark stock index is on track for the worst quarter since it's 1987 market crash. As of a few days ago, Wuhan, China, made a statement that their cases have started to decrease for the first time in two months since the coronavirus had originated there at a wild animal market. Signs of rebound shown by the Chinese stock market in places like Wuhan and other major Chinese cities help calm the U.S. market down. But, just because the Chinese stock market is up doesn't mean their economy is good.

China's auto industry is feeling a huge hit from this. Last month auto sales in China took a turn for the worse, going down nearly 80% from last year's 310,000 vehicles sold nationally. Economic activity of pretty much any kind has ground to a screeching halt as governments have placed restrictions on air travel and work to limit the amount of people in a confined space.