“Because of its genesis in China, coronavirus is both a demand and a supply shock to the global economy,” said Brian Nick, chief investment strategist at Nuveen, in a Tuesday note. “Outside of China, however, evidence based on February’s survey data suggests that demand remains solid, and supply issues are the key risk.”And it’s that threat of a supply shock — an unexpected change in the supply of a product or commodity — that is particularly unnerving for investors.
Big, negative supply shocks are rare, Nielsen noted, with the oil shocks of the early and late 1970s offering perhaps the most well-known examples. Other examples of supply shocks include storms, tsunamis, earthquakes, wars, and strikes. The problem is that there’s little that looser monetary policy or additional fiscal stimulus can do to offset the impact because those stimulus measures work by boosting demand.
Moreover, it comes in an environment where valuations for U.S. stocks and credit markets were “’priced to perfection’ or something close to it following the three Fed interest rate cuts last year and the resolution of various trade deals,” he said.
This is a malicious and deliberate attempt on the liberal media to crash a prosperous nation over such an over blown and sensationalized story that its hard to even fathom. But it’s happening. Congratulations. Well done. Put this one in the history books.
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