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In the coronavirus crisis, we are united in not knowing what the new normal will be

March 19, 2020, 10:49 AM UTC

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Good morning. David Meyer here in Berlin, filling in for Alan.

Days after President Donald Trump was inaugurated three years ago, the Dow Jones industrial average cleared the 20,000 mark for the first time—a precursor to what turned out to be the final few years of an historic 11-year bull run. Yesterday, the index crossed that threshold again, heading in the other direction.

And the markets are likely to keep falling. Hercules Investments CEO James McDonald reckons the Dow could plausibly hit 15,000 points. Deutsche Bank’s researchers think U.S. GDP will fall 13% in Q2 on an annualized basis; JPMorgan Chase has it at -14%.

McKinsey has come up with two broad scenarios. The more positive scenario—in which China and East Asian countries continue to bring the situation under control there, and virus seasonality lessens the load elsewhere from mid-Q2—involves impairment of supply chains through much of Q2, with U.S. and European restrictions hammering consumer spending and business investment throughout the year. If the viral pandemic shows no seasonal decline, the demand shock lasts a year, and layoffs and bankruptcies risk feeding into “a self-reinforcing downward spiral.”

But what about central-bank actions such as the European Central Bank’s €750 billion ($816 billion) bond-buying program? As Bloomberg’s John Authers puts it: “Nothing [ECB President Christine] Lagarde announced will help any companies to open for business, boost their revenues or pay their staff. That instead depends on public health authorities containing the virus, while fiscal policy will be needed to mitigate the effects of whatever measures are taken to achieve that goal.”

It’s over to the governments now, in ways that no-one could have anticipated just weeks ago. In the U.S., a trillion-dollar stimulus package is being negotiated that involves sending everyone free money, in order to stave off economic collapse. The Trump administration may even take equity in corporations that it bails out. France is considering nationalizing its big companies in order to save them—Spain has already nationalized its private hospitals to aid the coronavirus fightback.

This is a whiplashed world right now, and none of us has any idea what the new normal will look like. Disorienting and scary as that may be, perhaps we can take a perverse sort of comfort in the situation: we may increasingly be hunkered down in isolation, but ultimately we are all in the same boat.

More news below.

David Meyer


Factory closures

General Motors, Ford and Chrysler have followed the lead of their European counterparts and decided to shutter their factories in the U.S., Mexico and Canada. The companies will temporarily lay off workers. Of course, even if it weren't for the infection risk that precipitated the decision, nobody is going to be buying a car right now. Wall Street Journal

Google Europe

Google has relented to pressure from its European employees and agreed to set up a works council—though really it had no choice. Such councils give employees the right to be consulted about organizational changes and job cuts. European law demands their creation if enough employees in at least two countries ask for them; 153 Googlers from 11 European offices asked. Bloomberg

Young people

In a particularly worrisome development, new data from Europe and the U.S. suggests young people aren't as impervious to the coronavirus as was recently thought. Many are falling seriously ill, requiring intensive care. As Covid-19-stricken genetics professor Clement Chow noted in a tweet: "I’m young and not high risk, yet I am in the ICU with a very severe case. We really don’t know much about this virus." Fortune

Krone collapse

The Norwegian krone, battered by the coronavirus and oil price war, has been having a terrible time lately. But yesterday it fell as much as 14% against the dollar and 12% against the euro—it partially recovered but that's still its worst performance in modern times. Now the Norwegian central bank is preparing to intervene by buying the kroner that nobody else wants. Bloomberg


Flattening the curve

Boston Consulting Group CEO Rich Lesser has written a piece for Fortune about how to mitigate the terrible economic consequences of "flattening the curve" to save lives. He presents a series of recommendations, ranging from new risk stratification methodologies to new regulatory and support frameworks that will allow people to get on with their lives as safely as possible. Fortune

Amazon infection

Amazon has had to temporarily shutter a small New York warehouse due to an associate testing positive for coronavirus. Meanwhile, Amazon workers at a warehouse near Paris staged a strike yesterday, calling for the facility's closure as an anti-contagion measure. Reuters

Buying stocks

Feeling brave? CNBC has an interesting list of expert tips for buying stocks in a bearish market: invest in what you know; look for "babies that have gotten thrown out with the bath water"; and avoid over-trading. CNBC

Coronavirus election

Fortune's Nicole Goodkind has written a very useful Q&A about the small issue of this year's U.S. election, and how it might run against the backdrop of the coronavirus pandemic. Key points: the Democratic primary season is likely to drag out; party conventions may still go ahead, albeit smaller than usual; and voting in the general election could take a different form than usual. Fortune

This edition of CEO Daily was edited by David Meyer.