Reopened my SPY put. As of now the S&P 500 is down only 5% over the last year.
Yet Fitch just downgraded the economic outlook to this:
Quote
At the time it compiled its March outlook, only Spain and Italy had joined China in implementing full lockdowns, but “we now have to incorporate full-scale lockdowns across Europe and the US (and many other countries) in our baseline forecasts,” said Fitch, which now assumes lockdowns could reduce GDP in the EU and US by 7% to 8% respectively during the second quarter of 2020. Fitch said this would be “an unprecedented peacetime one-quarter fall in GDP,” and is similar to what it now estimates happened in China during the first quarter of this year.
The new core assumptions used in Fitch’s calculations include a two- to three-month lockdown in key economies with a five- to six-week period of peak movement restrictions. It said this would result in a rapid and significant deterioration in the labor market and a sharp reduction in personal income with proportionate declines in demand for discretionary goods and services.
Fitch said there should be a “decent sequential recovery in growth” as lockdowns are removed, inventories are rebuilt, and policy stimulus packages take effect. However, this is assuming that the health crisis is mainly under control by the second half of the year, and even then the firm’s baseline does not see GDP rebounding to its pre-virus levels in the US and Europe until late next year.
As gloomy as the new forecast is, things might end up being even worse, according to Brian Coulton, Fitch’s chief economist, who told CIO that “the uncertainties surrounding these forecasts are extremely high and risks are on the downside.” He also said that it’s too late for a worldwide recession to be avoided, adding that “we are already there really. A deep global recession is now Fitch’s base case.”
So they predict we won't reach pre-virus GDP until late 2021, yet we're down less than 5% YOY in US markets? If you though asset prices were expensive 3 months ago, that will look like a bargain when earnings plummet and we're barely trading down.
https://www.ai-cio.com/news/fitch-downgrades-outlook-pandemic-worsens/This post was edited by ofthevoid on Apr 8 2020 01:36pm