Across Europe, governments have ramped up the COVID War with a wide range of rules that are locking up and closing down major segments of the economy.
With few exceptions, across the globe, nations have sunk into sharpest economic contraction since the Great Depression. From the U.K. to Argentina, from India to South Africa, credit ratings are being downgraded by Moody’s as the nation’s debt level rises to new heights and GDPs hit record lows.
Tourism, hospitality, restaurant, trade show, entertainment, wedding/events etc., have fallen into “Greatest Depression” despair… as have all the nations, states, cities, and supportive businesses and employees that depend on their revenue streams.
In the new disconnect from reality, as it was back in the dot-com days, tech companies are pushing the markets up as the economy goes down. Back in 1999, at the peak of the dot-com boom, tech accounted for 37 percent of the S&P 500. It now accounts for 40 percent, according to Dow Jones Market Data.
Unlike back in the dot-com boom days, when the Internet Revolution had just begun and the hype of Pets.com and others vastly out-valued their income reality, technology companies 2020, while many are overvalued, will continue to dominate the financial future. However, we forecast, they will not be able prevent equities to plummet into bear market territory as the “Greatest Depression” worsens.
Unlike the days of the Industrial Revolution where jobs were created to manufacture and sell what was being created… while big tech invests big bucks to build their businesses, they don’t create a massive workforce.
For example, with online buying hitting new highs and brick and mortar crumbling, across the labor force field, the higher hi-tech rises, the less human labor will be required. Thus, more people will be out of work and lower wages for the massive warehouse workforce that will be increasingly replaced by robots.
Across the spectrum, from online learning that will require far fewer teachers and much fewer class rooms, to virtual health care… the work force will shrink, unemployment will rise, and economies will continue to decline.
On The Market Front
Today the Dow closed up 113 points and the Nasdaq rose 37 points. Gold and oil held steady, as both will rise and fall short term on the news of the amount of monetary methadone, i.e., stimulus, Washington injects into the economy.
For the remainder of 2020, we maintain our forecast for oil stay in the low to mid-range $40 per barrel.
As for gold and silver, prices will continue to rise as economies decline and governments print more digital money, backed by nothing and printed on nothing. The more cheap money printed, the lower the value of the currency, and the higher the demand will be for precious metals.
