Another recession (#390)

Simon Shares

• Recession, surely nobody surprised? Growth lower for longer. The budget is certainly designed to help, but the R160billion cut from pubic sector wage bill is not going to be easy. Likely we'll also now get at least 2 rate cuts this year, each 0.25% minimum.
• Last week of February was the worst week for global markets since 2008. It was violent and it's not going away. COVID-19 marches on. Of note, 94k sick but 3.4k dead. With mortality of 1% it should be 300k sick and at 2% mortality it should be 160k sick.
• Are markets ready for the spike in sick? We'll find out but the Fed is not waiting.
• Negative US rates in my life time as the Fed panics and cuts by 0.5%. Thing is COVID-19 is a supply issue, not a demand side. Fed can influence demand with rates, but that does nothing to the supply side. This after a G7 meeting, but only the Fed has responded so far and US markets sold off some 3% after the rate cut.
• At the post rate cut press conference;

"the risks to the U.S. outlook have changed materially" -- Powell

"The virus and measures taken to contain it will surely weigh on the economy ... for some time." -- Powell

• Shoprite* (JSE code: SHP) very solid results with rest of Africa back into profit (albeit small), great cash flow and local margins holding as they gain market share.
• Upcoming events;
  • 5 March ~ JSE Power Hour: COVID-19, markets in trouble
  • 26 March ~ Small money changes that make a big difference
  • 09 April ~ JSE Power Hour: Trader's game plan

* I hold ungeared positions.

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