Empty streets of New York City during Coronavirus quarantine lockdown. Image source: Ivan Kokoulin © 123RF.com
The most important economic event this week is going to be the Bureau of Economic Analysis' release of the advance GDP numbers for the fiscal quarter ending March 2020.
The advance data is released prior to the preliminary and final GDP reports, which is why this initial quarterly report typically exerts the most significant impact on the market.
This report, which is scheduled for release on Wednesday, is not going to be anything like other times, because it is anticipated to reflect on the massive adverse impact of the coronavirus fallout.
The economic toll started intensifying after the US economy was mostly closed down, following the US government's decision to impose a national lockdown in a bid to curtail the outbreak of the novel coronavirus.
US GDP Growth Rate. Image source: TradingEconomics.com
The consensus forecasts project the growth rate to fall from the 2.1 per cent that was recorded for the previous quarter, to negative 3.9 per cent for the first quarter of 2020. The economic contraction is expected to be the most significant one on record since the height of the credit crunch in 2008.
Given the recent increase in the number of US citizens seeking unemployment benefits and the observed deterioration in the retail sector, the contraction of the GDP growth rate could be even more substantial in light of the extremely volatile market at present.
Such an outcome would pressure the current stock market's tentative recovery, as well as drive the yields of the most significant government bonds even lower. On the other hand, better-than-expected results – the observed contraction being lesser than minus 3.9 per cent – could have the exact opposite effect.
If the extent of the coronavirus fallout is indeed smaller than previously feared, this could have a positive impact on the government treasuries' yield that would be comparable to the positive jump that was observed in early-March.
Additionally, the rally on the S&P 500 and the Dow Jones Industrial Average could be accelerated with a more positive general outlook.
Inidces vs Bonds Comparison Chart. Image source: Trendsharks ©, created with TradingView.com
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