Bad news is good

Wednesday 8th April 2020

How weird these days are. Now bad news is good news. 

First the economy – usually on a  Wednesday at this time of the month, the financial commentariat would be sifting through the minutes of the last meeting of the Federal Reserve Bank, the USA’s central bank, which tends to give a good reading of the largest economy in the world.

If that meeting had resulted in, for example an interest rate cut, the minutes might reveal the level of agreement or dissent, and that can often give a helpful idea of who the ‘hawks’ are and who are the ‘doves’ on the Federal Open Markets committee. An upbeat assessment of the economy is usually followed by a rise in the stock market – a bearish tone and stocks tend to tumble. 

But now as Panmure Gordon’s chief economist Simon French explained to me on my Business Breakfast show on JazzFM ( this morning, it’s all different. ‘The worse the data, ‘ he said,’ paradoxically the better it is from a health standpoint. It means the US economy is shuttering, which means that the chance of bringing the infection under control has improved – so bad data is good news.’

Similar sentiments on the same programme from Diane Wehrle from the retail analytics company Springboard, which, despite a rather big increase in numbers because of sunny weather last weekend , had noted an 80% fall in the numbers of shoppers compared with this time last year.

No surprise, of course, ‘ but’, she said ‘ we’re in a new place. The new good is bad and we now want to see the declines in footfall because it means people are adhering to government guidance.’

In week which has seen big store chains like Debenhams once again approaching the wall, we will surely see more wreckage – and while City watchers search for some infection slowdown to boost equities, it looks as though the real economy will take many months to recover. What that landscape may be, is anyone’s guess. That is the real bad news, of course.


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