What Comes After Coronavirus: Brief Predictions
This is going to be very direct.. Here are my predictions about what comes with and after the coronavirus episode:
Capitalist Global Economic System will survive. While there will be local or regional protectionism and a rethinking of the supply chain, the fundamental system will be intact. In whatever vague or specific way you define it. The prevailing is order is not to change and capitalism can adapt much more easily than expected by some intellectuals. Most importantly on my part, I see the problem more of the way we are dealing with the virus than the virus itself - as possibly triggered by Chinese Wuhan containment success and Italy (and Spain) death spiral; our policies have shifted to quasi intelligent lockdowns. However only intelligent measures can seek maintain balance between health and all else that matters. Things will balance and normalize after a tough April and slowly mitigating May period.
Financial Markets will be volatile, jittery and quite literally nerve wrecking but they will not collapse altogether. Fed and the major central banks will stabilize most of the mission critical aspects of the system and the Emerging Markets will have respite with a lag.
However both the Dollar and also American Hegemony will take a hit after the initial boost. This will be due to many factors including but not limited to: (i) Need to decrease global dependence on the Dollar for almost all other countries, (ii) Relatively big and persistent US budget deficit, (iii) Lack of domestic support for equitable internationalism in the US, (iv) Faster growth in China and the Emerging Markets, (v) Lack of global credibility in American leadership and political elite and (vi) The way coronavirus problem was handled in the US.
Gold will not shine as bright as today when the dream of excess liquidity driving up gold prices or the inflation will fizzle. Expect to see 1200 - 1450 range rather quickly after the current ETF buying dissipates. There is a pricing dilemma with defensive buying. If things are bad, then gold is not adequate as a global payment mechanism, hard to store, non income generating and what would you do with a bar of gold. It is a good hedge with historical subliminal connections in times of risk off in an orderly world - not that good for dystopia. Furthermore as prices of all other assets are like less than 1/2 in terms of gold, the relative attractiveness is dwindling. On the recovery case as things go to normal, inflation expectation can be a positive driver but other assets will recover far quicker. On top of this, production cost and price difference of the current magnitude will not make sense in normal times. Thus the price correction of 1450 USD a week ago was a rational profit taking which was sidelined by individual investors piling in. While short term can play out to the upside from 1625s of today, watch out for downside risk that can materialize anytime.
Consumer Behavior will show limited change. Maybe being a bit more environmentally cautious or passing on the next unnecessary clothing article will happen but not much more. Most people will be business as usual and given time hundreds of millions of new consumers from Africa, India and the like will drive global consumption of anything further up.
The jury is out on Government - Individual relationship. While some increased level of state control and authoritarianism is possible in places, technology will enable individuals to check on the government more effectively as well. The politicians will be under timely performance pressure from a widening client population base.
The health system will be very strained and locally collapse in some countries (or locations). However with the measures taken infection peaks will come down and for most of the Northern Hemisphere things will start to normalize in May. Even though effects are felt with a lag, most countries will report falling case numbers by late April to mid May.
Psychiatrists and psychologist will have a 2 year corona span with anxious clients seeking a lot of consulting time. Along with vaccination, all sorts of supplements and viral drugs will hit the market and boost the pharma industry as well as the savvy investors. Up until the next problem, urban masses in particular will have this epsiode to blame. On the political front, for good and for bad; political systems will use the experiences of this episode to put the blame on the opponent mostly not that rightly so.
The pandemic will have legs but as most experts have commented those legs will be significantly less dangerous than this round as populations will have some immunity, health systems will be more ready, supplies will be in place and social distancing among other precautions will ease the process until an effective vaccine is found.
Travel industry will not recover in 2020 with secondary legs, economic concerns and lag effects. There will be some activity possibly in July and onward. In Emerging Markets such as Turkey, the relative prices in USD (or EUR) terms would be dirt cheap with the recent sell off (which would partially recover by then). Thus with better management of the situation and the peak passed, an incomplete recovery will be observed in 2020. The next year will be a huge improvement on 2020 and at the latest 2022 will see full recovery excluding consumer preference shifts (of which I expect limited impact).
Entertainment and media will see more geographically widespread adaptation of streaming resources. Alternatives that benefited from the pause in major events such as NBA and soccer leagues will keep some of that traction. Online media will be somewhat different, somewhat more resilient and possibly more profitable following this episode.
Most destabilizing of all would be the accentuation of the digital divide. Wikipedia defines it as: A digital divide is any uneven distribution in the access to, use of, or impact of Information and Communication Technologies between any number of distinct groups. These groups may be defined based on social, geographical, or geopolitical criteria, or otherwise. Digital divides will multiply and spread among countries, industries, age groups, population within one country, workers within an industry and employees of the same firm. Those who have access to the tools will be a step ahead but those who can use them will be couple of steps in front. Yet the real game changers will be those who (intuitively or cognitively) understand and in effect live the digital transformation. In practical terms this will mean anything from office productivity tools to online storage, from working on collaborative documents to hashtags and digital love to digital persona.
Digital divide will encompass new ways of work and competition for jobs will be further globalized. Skill sets will depend on ever developing education and expertise and less so on traditional schooling channels. As driverless cars are becoming more fact than fiction, drone delivery and air/sea based mass transit options will kick in. The coronavirus episode will not be the sole driver for this change. Much of this technology and aspiration such as remote working exist already. It is only that this episode will fuel the change and make it more mainstream. While it could be years for dissecting the office and party "remoting" the workers; for other developments, timing will be even further on. Yet the profound change from this experience is that such changes and developments would have more legitimacy, more investment and faster adoption than anticipated before.
Psychiatrists and psychologist will have a 2 year corona span with anxious clients seeking a lot of consulting time. Along with vaccination, all sorts of supplements and viral drugs will hit the market and boost the pharma industry as well as the savvy investors. Up until the next problem, urban masses in particular will have this epsiode to blame. On the political front, for good and for bad; political systems will use the experiences of this episode to put the blame on the opponent mostly not that rightly so.
The pandemic will have legs but as most experts have commented those legs will be significantly less dangerous than this round as populations will have some immunity, health systems will be more ready, supplies will be in place and social distancing among other precautions will ease the process until an effective vaccine is found.
Travel industry will not recover in 2020 with secondary legs, economic concerns and lag effects. There will be some activity possibly in July and onward. In Emerging Markets such as Turkey, the relative prices in USD (or EUR) terms would be dirt cheap with the recent sell off (which would partially recover by then). Thus with better management of the situation and the peak passed, an incomplete recovery will be observed in 2020. The next year will be a huge improvement on 2020 and at the latest 2022 will see full recovery excluding consumer preference shifts (of which I expect limited impact).
Entertainment and media will see more geographically widespread adaptation of streaming resources. Alternatives that benefited from the pause in major events such as NBA and soccer leagues will keep some of that traction. Online media will be somewhat different, somewhat more resilient and possibly more profitable following this episode.
Most destabilizing of all would be the accentuation of the digital divide. Wikipedia defines it as: A digital divide is any uneven distribution in the access to, use of, or impact of Information and Communication Technologies between any number of distinct groups. These groups may be defined based on social, geographical, or geopolitical criteria, or otherwise. Digital divides will multiply and spread among countries, industries, age groups, population within one country, workers within an industry and employees of the same firm. Those who have access to the tools will be a step ahead but those who can use them will be couple of steps in front. Yet the real game changers will be those who (intuitively or cognitively) understand and in effect live the digital transformation. In practical terms this will mean anything from office productivity tools to online storage, from working on collaborative documents to hashtags and digital love to digital persona.
Digital divide will encompass new ways of work and competition for jobs will be further globalized. Skill sets will depend on ever developing education and expertise and less so on traditional schooling channels. As driverless cars are becoming more fact than fiction, drone delivery and air/sea based mass transit options will kick in. The coronavirus episode will not be the sole driver for this change. Much of this technology and aspiration such as remote working exist already. It is only that this episode will fuel the change and make it more mainstream. While it could be years for dissecting the office and party "remoting" the workers; for other developments, timing will be even further on. Yet the profound change from this experience is that such changes and developments would have more legitimacy, more investment and faster adoption than anticipated before.
Once all this blows out, mortality rate will come out to be less than 4% and that will be adjusted by some experts to clean the effect of deaths that would have occurred without coronavirus presence. Sometime later when all is calmer, some of us will realize that roadkill takes around 2 million lives a year and millions more lose their lives due to complications related to lifestyle and dietary issues related to obesity, pharmaceuticals and air pollution. As World Health Organization reported around 3 million deaths due to lower respiratory infections in 2016, some inquisitive experts will ponder where corona and other causes overlapped. But most importantly, something will not happen: An overwhelming majority of us will still not make our peace with the notion that death happens. Efforts to deny and delay will always have costly consequences. Whereas efforts to make life more livable whilst making that peace could have reaped a lot more than sown.
April 2020, Istanbul
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