| There's always next year | The Philippines shuts down |

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Hi John, here's what you need to know for March 18th in 3:13 minutes.

🤝 These are uncertain times, and we want to do our bit to help clear up any questions you might have about the financial impact of the outbreak. Tell us what you want to know, and we’ll have our analysts answer as many as they can later this week.

Today's big stories

  1. Some analysts have slashed their global economic growth forecasts, while company profits are set to be dragged down with them
  2. Our analysts investigate what governments might have up their sleeves to help central banks counter coronavirus, including “free money" – Read Now
  3. The Philippines shut its financial markets in response to coronavirus, and other countries may yet follow suit
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Under The Weather

Under The Weather

What’s Going On Here?

Investment banks shared miserable economic growth forecasts this week, and drenched companies are bracing themselves for more storms ahead… but first, here’s Jerry with sports!

What Does This Mean?

Goldman Sachs was among the first to cut its economic forecasts for the US, admitting it now expects growth in the world’s largest economy to stall this quarter – and fall by 5% in the next – as companies and consumers alike cut back on spending. The recovery in growth it’s predicting later this year, meanwhile, will be too little, too late: Goldman thinks the US economy will only grow by 0.4% in 2020.

Morgan Stanley is even more downbeat: it reckons there’ll be a worldwide recession, even as global growth ekes out an estimated 0.9% annual gain (emphasis on the “eek”). That pessimism is likely to be vindicated by Germany’s latest investor survey, which showed investor confidence this month was at its lowest since the 2008 global financial crisis. And that dovetails with another of Goldman’s predictions: that Europe’s also headed for a recession this year.

Why Should I Care?

For markets: From economic growth to earnings growth.
According to TS Lombard, company profits (as measured by their “earnings per share”) have fallen compared to the previous year whenever annual US economic growth has dipped below 2%. And with debt repayments likely to be missed and unemployment likely to rise, TS Lombard is expecting history to repeat itself: it reckons profits this year could be 14% lower than in 2019.

The bigger picture: Known unknowns.
Most analysts believe economic activity will start to pick up again after April, and that greater access to “cheap money” should make growth in the second half of the year significantly higher than the first. Whether that actually happens, of course, depends on several unknowables, including the accessibility of coronavirus treatments, the effectiveness of government actions, and the speed post-pandemic life returns to normal – if at all.

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2/3 Premium

"Want Some Free Money?"

Central banks around the world have already introduced emergency measures to combat the economic effects of the coronavirus. And now governments are beginning to join them – with the US potentially set to write every citizen a check.

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Closed For Business

Closed For Business

What’s Going On Here?

The Philippines announced it was shutting down the country’s stock, bond, and currency trading markets on Tuesday, even as the world’s biggest financial markets keep ticker-taping along.

What Does This Mean?

In an apparent response to the coronavirus, the Philippines broadened its social and economic lockdown to include the country’s financial markets (though they’ll reopen on Thursday). The country likely wanted to stop local investors from panic-selling, which might sound familiar to China’s investors: the Chinese government kept financial markets shut when it extended the Lunar New Year holiday back in February. US investors might know the feeling too, given that its stock market shut down after 9/11.

A major argument against a closure like this is that it could lead to even more panic: it’s perhaps more comforting to know a share price is falling than to know it’ll eventually drop by some unpredictable amount, after all. And while most companies are simply hunkering down and trying to survive right now, the “liquidity” offered by open markets means they can at least try to raise money if they need to.

Why Should I Care?

For you personally: Short-term cash versus long-term gains.
Despite short-term market moves, investing’s all about growing your pot of money in the medium term (say, three to five years) and long term (five years and more). With that in mind, it shouldn’t be much cause for concern if your local financial markets close temporarily. But if you are going to need immediate access to your cash, you’d be better off keeping that cash away from incredibly volatile stock markets altogether.

For markets: Make a warehouse a warehome.
Picking individual stocks that have fallen in value in the hopes they’ll rise is risky business, but analysts at Wedbush are all in: they recommended buying shares of companies like Facebook, Peloton, and Amazon on Tuesday (tweet this). And with Amazon reportedly hiring 100,000 new warehouse workers due to rising demand, they’re probably feeling pretty pleased with themselves.

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💬 Quote of the day

“Expect trouble as an inevitable part of life, and when it comes, hold your head high, look it squarely in the eye and say, ‘I will be bigger than you. You cannot defeat me.'”

– Ann Landers (a pen name created by Chicago Sun-Times advice columnist Ruth Crowley)
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🤔 Q&A · RE: Fighting Talk

“Why is the European Central Bank buying corporate bonds as well as government bonds?”

– Josef in Bedford, UK

“The aim of a central bank’s purchasing of government bonds – in a process known as quantitative easing – is to lower interest rates on new bonds. That’s because when the central bank buys up government bonds, the rising demand pushes their yields down and prices up – and it’s those yields investors use as a guide for pricing new bonds. By including corporate bonds in their purchases, the central bank’s effectively doubling down on its efforts: it’s pushing the yields of risky company bonds down, in the hope it’ll help reduce the cost of borrowing for even riskier firms. The idea is that those companies are less likely to run out of cash if they have easy access to loans.”

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⚡️ Lightning insights

We’ve put together a special collection – Recession-Proof Your Portfolio – which includes our Packs on Bear Markets, The Next Recession, Stock Picking, and more. Everything you need to find your footing, and some opportunities too, as markets rumble underfoot. Check it out

📚 What we're reading (that isn't about coronavirus)

  • Don’t do (550x the usual amount of) drugs, kids (CNN)
  • Inside MIT’s cut-throat puzzle competition (Popular Mechanics)
  • The car company celebrity arms race (Fast Company)
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