This looks like a combination of the Great Depression, the 70s stagflation period, and the 08 subprime. The least talked about is the subprime similarity so I’ll start with that one 1/n

Housing prices will necessarily deflate. First the supply is increasing for obvious reasons. The prices are very inelastic, so small increase in supply will plummet prices. Not to mention potential defaults on mortgages because of unemployment and other secondary effects 2/n

The stock market is in denial. Especially the tech sector which was barely scratched. Apple is $260 where it was in November. Are the 16+ million unemployed going to lineup for the next iPhone. (There are good reasons for tech to be seen as safe heaven) 3/n

Or the monetary stimulus of the Fed is the equivalent of what Nixon did to the Breton Woods and getting rid of the gold standard. Stocks rallied after that. Cash was trash. Now cash is toilet paper. Not sure which asset class will prove Antifragile.

The deflationary pressures were very strong even before covid, mainly because of technological deflation as explained by @JeffBooth and demographics

The retirement crisis explained by @RaoulGMI is another huge deflationary pressure. Boomers are retiring, and with them consumerism. Even worse they will become net sellers of stocks, that millennials, saddled with student debt, can hardly compensate for.

So the Fed has to plug that hole, and it’s exactly what they have been doing. Covid is just speeding these changes that would have happened anyway, but it will leave some unique scars.

People caught in a lockdown with no savings will have scars for life like the generation from the Great Depression in a way that 2008 didn’t leave such scars.

2008 was not a matter of not having food on the table. Debt beyond lifetime, sure, but still just a number. Whatever jobs were there, to patch month for month. Now hunger and the prospect of homelessness even. People will become more frugal, which will be great long term.

The same levels of consumerism cannot be revived for some time after covid had been fully defeated. The demand side deflationary pressures will remain holding the price of oil down.

These will be balanced by some de-globalization forces that started with Us-China trade war, will now have full political support. To make supply chains more robust, save some jobs. Higher input production costs are inflationary in addition to the printing press of the Fed.

So V-shaped or even U-shaped recovery. Forget about it. Nike swoosh recovery over 2-5 years is the best we can hope for. (Real economy not stock market)

Furthermore the bailouts have made stock buybacks politically contentious. So a significant driver of the bull market for the past decade will be removed. The Fed will be forced to eventually step in and start buying stocks like in Japan.

Pension funds were another big driver of the stock market. With big unemployment numbers these flows will go down. Vicious cycle?

difference in this crisis is that the Fed acted very quickly and most definitely. The fiscal stimulus which is one part UBI for people and a big part bailouts for corporations is also positive, but it has the moral hazard element favoring companies with bad balance sheets.

Until this virus is defeated, any rally is premature. The market will have hard time pricing this very complex environment, which means a lot of volatility. News will alternate between positives like flattening the curve, vaccines to unemployment, bankruptcies and bad earnings