The GFC(Great Financial Crisis) of 2008 was one of the most notable crisis’ of our lifetime. Our families were all affected one way or another by the crisis. Billions of dollars in bailouts, catastrophic housing collapse and 401k’s wiped out. We may have seen movies such as The Big Short or read books about 2008, but we may very well be living inside something much worse than 2008..

Quantifying A Recession

How do we quantify a recession? According to the Federal Reserve Bank of San Francisco, a recession is defined as two consecutive quarters of decline of Inflation adjusted Gross Domestic Product(GDP). The decline in economic activity results from businesses slowing down. When businesses are not producing/manufacturing, they have no choice but to furlough or lay workers off. You can see the ripple effect starting to occur, right?

These workers' quality of life slowly declines with lack of income. In times of economic uncertainty, such as what Covid-19 has caused, citizens will only be spending money on essentials to survive. 

Consumer spending makes up 70% of the GDP in the United States. 

Coronavirus Catalysts

The origins of the virus all point back to China where we first started hearing about Coronavirus. Videos of bodys being stuffed in vans, citizens wearing masks, desolate streets and men in hazmat suits decontaminating the city. It was an eerie sight to witness. 

Wet markets are a customary way of life in China. Fresh fish, meat,  produce and other animals are sold to locals. The problem arises when exotic wildlife makes their way into these markets, such as bats, snakes, birds and possibly monkeys. These exotic animals are exposed to some.. Well exotic habitats. The animals end up working their way into local wet markets where all the other fresh produce is. It's easy to see how this spread so fast!

We have been calling a recession since October and the market started selling off in February. Now we didn’t know what would move markets, but all it took was one strong catalyst to show how vulnerable markets were. Markets have now made a new low 35% off its 2019 highs. There is a great chance we could hit 2450 and retest the 2020 lows. 

Global cases have now hit a massive 2.5 Million cases and it seems like the light at the end of the tunnel is a dim one. US deaths are quickly approaching 50,000. Cases in the US today rose by 5.7%. Speculation around a treatment & vaccine has made its way into the market. No substantial progress has been made in regards to a treatment. We still seem to be a long way from that. 

Economy Has Taken a Hit

The economy across the globe has taken a massive hit. Retail sales have shrank, unemployment has skyrocketed and production levels have sank. Many are forecasting terrible data:

  • JP Morgan projects 20% unemployment and 40% hit to Q2 GDP
  • Goldman sees a 15% jobless rate and 34% GDP decline.
  • Fed also expects the unemployment rate to reach 32%

Now these are some scary numbers! The Feds 32% unemployment rate is 3x what we saw in 2008. JP Morgans is twice as much. We obviously don’t know the exact numbers, but one thing is certain.. They will be worse than what we have currently seen. 

The virus went from a gunshot wound to a bacterial infection. Only a few are somewhat benefiting from the impact, such as Amazon. It's different for other retailers such as Macy’s and JcPenney. 

The retail sales(clothing and clothing accessory stores) represents stores such as Macy’s & JcPenney

Macy's was already struggling well before Covid-19, but this was a turning point into something much worse. 

A record 6 million filed for unemployment. These numbers are unprecedented! That is 6 million people who have been laid off,fired, or furloughed. The average american salary is 56,000 and if we take that by 6 million that is $336 Billion. $336 Billion has been taken out of the US economy. 

The crazy thing is that this all didn’t happen overtime, but happened over the span of a month! Many of the businesses that benefit from consumer spending have suffered. Defaults could start to happen due to businesses not having any sort of income. Countries manufacturing sectors will be slow to export at full scale. This means revenues in other countries and their private sector will be abysmal.

Is The Worst Yet To Come?

The important question is,is this really the end of what we are seeing? The simple answer, in my opinion, is no.

We have seen trillions of dollars in the form of stimulus hit the economy. $1,200 stimulus checks deposited into account by the click of a button! There has been a few different fiscal & monetary stimulus measures put out to aid workers and businesses in the US

The economic numbers coming, lock downs, and earnings will continue to weigh on the S&P. Markets have priced in negative data, but data will eventually come out worse than what the market has anticipated. With the forecasts mentioned above, a huge shock could come to market if they are correct. We aren’t going off of what JP Morgan and Goldman say, but even if we see half of the forecasts that would be enough to send markets lower. 


As cases continue to rise, economic sentiment continues to decline and uncertainty persists, markets are likely to react negatively. The S&P could very well retest the lows. A treatment still requires approval, trials and getting it out to the public. Georgia is also one of the states trying to reopen. This could be a recipe for a resurgence in cases. If this happens, it will only escalate the fear that is already lurkin.  It's extremely important to rationalize every angle with the current market. This will help get a bias in your Forex Trading and understanding why the market moves.

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