HOUSTON, April 17, 2020 — In the third of its weekly webcast series dedicated to topics around COVID-19, Asia Society Texas Center (ASTC) welcomed MSNBC anchor and journalist Ali Velshi, who spoke in conversation with ASTC board member and J.P. Morgan Private Bank Vice Chairman Martyn E. Goossen on the economic and financial impacts of the novel coronavirus, as well as what a return to normalcy might look like.

Setting the stage 

To open the program, Goossen shared the stark figures: as of April 16, there were over 2.1 million reported COVID-19 cases in 185 countries, with approximately 640,000 cases and over 32,000 deaths in the U.S. The spread of the virus was rapid, with the first case in China reported to the WHO in late December 2019 and the first case in the U.S. recorded on January 21, 2020. By the end of March, the U.S. had become the country with the highest number of total COVID-19 cases. 

Velshi noted that despite the high numbers, the true figure of all those who had or have been infected remains unknown due to insufficient testing. That uncertainty and lack of data are key drivers in market insecurity, he said. 

Extraordinary impact on the economy 

The latest unemployment figures from April 16 indicated that 5.5 million people had filed for unemployment, Goossen said, bringing the total number up to 22 million over the last four weeks. Additionally, he reported that J.P. Morgan revised its latest GDP forecast for the second quarter of 2020 to negative 40 percent, and made similar downward revisions to the GDP forecast for other countries around the world. Airlines and other industries have been hugely impacted, he said, and the 22 million jobs created from 2009-2019 are now gone. 

Velshi agreed that the impact was extraordinary, estimating that the new numbers likely meant the country is now at approximately 15 percent unemployment. Even in the recession of 2008-2009, unemployment never exceeded 10 percent. However, Velshi also noted that many of the jobs had not been destroyed but were merely on pause, simply because businesses couldn’t allow employees to work. The question is how many jobs would remain for people to return to once stay-at-home orders are lifted and parts of the economy begin reopening. Will people change behaviors in attending restaurants and bars or sporting events?  

A look at the markets 

In looking at the response of the markets to the COVID-19 pandemic, Velshi underlined that uncertainty is the primary factor behind market volatility. He explained that the pandemic has created the following dynamics: 

• Demand destruction (for example, people staying at home versus eating at restaurants) 
• Demand delay (there has been a 50 percent drop in clothing sales, but people will likely resume buying clothes) 
• Some demand creation (businesses pivoting to produce masks, or innovating new phone sanitization techniques) 

Velshi said the concern is that the markets do not have a sense of the net demand, whether it will return to pre-COVID levels, or how demand might shift — food being delivered rather than eaten at restaurants, or clothing being bought online versus in-store. 

Moreover, the uncertainty around the timeline of a vaccine’s release, whether it will be effective, and how many total people might be infected by COVID-19 are contributing to market volatility in addition to a second factor, which Velshi says is the velocity of high-frequency trading. “Sentiment plays a higher role than sensibility,” according to Velshi, because high-frequency trading often means decisions on these trades are not made by managers who know a business well, and therefore may be irrational. He said he believes that with time, most people who remain invested in the stock market will probably be fine. 

Goossen added that the price war over oil between Saudi Arabia and Russia over the past four months also contributed to market volatility. While an agreement has now been reached, the damage has been done to the global economy — in part, Velshi pointed out, due to the lack of a global coordinated response, which had taken place after September 11 and after the 2008 recession. 

How the government has responded 

Velshi emphasized the importance of a coordinated government response in helping curtail uncertainty. Without clear coordination and communication from their leaders, people will make their own choices, sometimes to the detriment of their own safety or those around them. 

Goossen pointed out that the government response to the economic impact was rapid, especially in comparison to 2008. The Federal Reserve moved interest rates to zero over the course of only 17 days compared to 300 days in 2008; it started quantitative easing (QE2) in the same amount of time compared to 286 days in 2008. The government response, including the $2 trillion stimulus bill, also helped spur market recovery. Velshi, however, argued that the government should have reacted even earlier and faster, given the information it had about COVID-19 in January and February, and that earlier action could have helped prevent the escalation of cases as well as the deep economic effects. 

What does “normalcy” look like? How do we get there?  

The question of when and how to return to normal is forefront to many people, Goossen said. Velshi said the government’s proposed phased approach makes sense, one that follows virus and treatment milestones as indicators to slowly open. This will help avoid a second surge of cases. Because it iis unlikely that lockdown and stay-at-home orders will persist for 18 months until a vaccine is found, Velshi said he believes additional testing is vital and would help people determine their paths of action if they know whether they have COVID-19, or whether they have had it and recovered and built immunity. Velshi acknowledged that contact tracing is also an option but also expressed caution over the privacy concerns. 

Regardless, “normalcy” may look different even after reopening, Velshi said. He drew a comparison to September 11: Though the attack fundamentally changed the way airports handled security, individuals did not otherwise change their way of life, because coping was about continuing life as normal. He said COVID-19 could be different because people are not sure of how to cope — whether it means wearing masks, maintaining social distance, or other behavior changes — and it is unclear how much of that behavior will persist even after parts of the economy reopen. But he said he believes that people are adaptable and that a new sense of normalcy will emerge. 

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