“I would demand there would be no stock buybacks”, Donald Trump said Friday, during the administration’s daily coronavirus press briefing.
He also leveled some token criticism at corporate management teams who plowed the windfall from the tax cuts into share repurchases – as though that wasn’t an entirely predictable outcome, and one the administration was just fine with as long as it was driving up stock prices.
Just before the briefing, Andrew Cuomo essentially told New Yorkers to stay indoors. “When I talk about the most drastic action we can take, this is the most drastic action we can take”, Cuomo said, at a press conference of his own in Albany. “We’re all in quarantine now. This is not life as usual. Accept it. Realize it and deal with it”. He ordered nonessential businesses to keep 100% of their workers home.
Individuals have to stay at least six feet apart in public, and even businesses that provide essential services (e.g., grocery stores, pharmacies and banks), are required to enforce restrictions that mandate employees and customers maintain at least six feet of space between them. Public transit is only to be used if absolutely necessary and outdoor activities should be limited. Food deliveries count as “essential services”, Cuomo said. He suspended evictions for three months in the state.
Trump, meanwhile, suspended federal student loan payments for 60 days. The president praised Walmart for “incredible volumes” and said the Defense Production Act is already in use. “We have millions of masks which are coming and which will be distributed to the states”, the president said.
“If this doesn’t work, we’re going to keep doing it until we get this going”, he rambled, frankly doing his best in the face of an impossible situation. “I want to get workers money. We’re not talking about a thousand dollar check we’re talking about much more than that”.
The dire warnings about the severity of the coming recession continue to pour in. Goldman grabbed headlines with their prediction for a 24% contraction in Q2, but as noted on Friday morning, other banks’ forecasts aren’t much rosier and could well be marked down in the days and weeks ahead.
In their latest update, for example, Deutsche Bank sounds a dour tone.
“We now see a severe global recession occurring in the first half of 2020, with aggregate demand plunging in China in Q1 and in the EA and US in Q2”, the bank’s Peter Hooper and Matt Luzzetti write, noting that “the quarterly declines in GDP growth we anticipate substantially exceed anything previously recorded going back to at least World War II”.
“We see the US economy experiencing the sharpest contraction in the post-World War period with activity plunging by about 13% on an annualized basis in Q2”, the bank warns.
Deutsche goes on to reiterate just how unprecedented this situation is shaping up to be: “To put this into perspective, this rate of decline is more than one and a half times the sharpest contraction during the financial crisis, which was -8.4% annualized in Q4 2008”.
In Germany, Deutsche Bank sees “a massive drop” in GDP next quarter in the range of 6% to 10%.
As far as stimulus goes, Nancy Pelosi, Chuck Schumer, Mitch McConnell and Steve Mnuchin are still working out the details, but the Treasury Secretary reportedly sees the GOP bill as inadequate. Specifically, Mnuchin wants more direct cash payments to Americans.
McConnell’s bill would grant tax rebates to individuals of $1,200 and $2,400 for married couples, plus $500 for children. Mnuchin wants two rounds of $1,000 checks (and $500 per child), at a cost of $500 billion, with the stipulation that the second round only go out in the event the emergency continues.
The Fed on Friday stepped in to assist the struggling muni market, but Jerome Powell will invariably have to do more.
“Other crisis-era tools could emerge, including the Term Auction Facility which allowed the Fed to provide term funding to a broader set of counterparties against a broad array of collateral”, Deutsche Bank says, echoing comments from Ben Bernanke and Janet Yellen. “If deemed necessary, we also believe the Fed would welcome the authority to expand the scope of what they can purchase, with corporate debt being an obvious target”, the bank went on to remark.
While the Trump administration’s briefing was still going on, Boris Johnson effectively locked down London. Cafes, bars and restaurants are closed from Friday. Schools in England, Scotland, Wales and Northern Ireland are all shuttered until further notice.
Italy said it suffered its worst one-day rise in deaths yet, reporting 627 fatalities in the last 24 hours alone. The total is now 4,032. Total cases jumped 15% to 47,021.