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The Expansion Is Set To End

The Expansion Is Set To End

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The current shock that the investment world is facing has three unique features: it is exogenous, it will likely be temporary, and its effect on the real economy is extremely uncertain. In spite of the significant sell-off of most growth-oriented assets since mid-February, we are concerned there is further downside ahead. The global economy is on track to contract significantly this quarter, enough to end the ten-plus years of expansion following the GFC. The violent market action should not be understated, but the underlying cause – an accelerating pandemic requiring large parts of the economy to shut down – is still with us. Fiscal and monetary support and stimulus will help to alleviate and smooth the effects, but they are not a panacea for the difficulties ahead for the real economy and markets.

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What's Next?

Estimating The Impact Of Quarantines

To understand the likely impact on the economy, we considered a model for a flu pandemic developed in the epidemiological literature (Health Outcomes and Costs of Community Mitigation Strategies for an Influenza Pandemic in the United States, Perlroth et. al., Clin. Inf. Dis. 2010 Jan 15;50(2):165-74). By looking at the decomposition of the US and Eurozone GDP and using a consumption-cut quarantine scenario, we can estimate the impact of the current social distancing measures on these two major economies. In quarterly terms, a quarantine that would last for two months (as in China), with 90% of the population complying and cutting consumption by 70%, would result in a -5% (qoq) growth shock. This would bring 2020 US growth to -2.9% and Eurozone growth to -3.6% (yoy), accounting for growth normalisation in the second half of the year. Thus, according to our core scenario, 2020 should see the first global recession since the Great Financial Crisis. This scenario assumes that the quarantine will have a limited impact on financial services, insurance, utilities and healthcare services, and leaves 20% of usual energy consumption. If the current shock is not temporary, investments will decline and lead to a more severe and longer-lasting scenario. In such a case, the -5% estimate could become as much as -8%, the largest macro shock ever seen for such a short period.

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Even With Monetary Support The Deterioration In Macro Data Is Alarming

It began earlier this month with the publication of China’s Manufacturing PMI, which undershot dour expectations on its way to hitting its lowest level in fifteen years. Two weeks ago, the Philadelphia Fed’s business outlook survey plunged to levels last seen in 2011 and 2015, periods of significant slowdown in the US. This past week started with the European Commission’s consumer confidence survey reaching the lows it hit in 2011, the peak of the Eurozone sovereign debt crisis.

The middle of the week brought the German Ifo business climate index, which hit its lowest levels since July 2009, lower than worrisome market expectations. Then, on Thursday, we got from the US an initial jobless claims number of 3.3m (seasonally adjusted), a 33 standard deviation move from the historical mean, well past the consensus expectation of 1.7m. This macro data is not just disappointing, it is alarming. And while we still expect the slowdown to be temporary, the degree of the deterioration suggests that the risks to the economy are strongly titled to the downside, especially since the US is still relatively early in its response to the virus. Our Growth Nowcaster has plunged precipitously as well on the back of this data and now signals that we are at a high risk of currently being in a recession.

monetary support

Additional Monetary Support: Bad News Is Good News, But Only For So Long

This bad (horrendous may be more apt) news prompted additional global fiscal and monetary support, especially in the US where a USD 2tn stimulus package was signed into law and the Fed made clear they are ready to use as many levers as possible at their disposal. Combined with very negative investor sentiment, cleaner positioning, and valuation opportunities, growth-oriented assets rallied: the MSCI All Country index was up 10% on the week, while the Barclays US Corporate Bond index was up over 5%. However, at this point, the rally looks to us like a technical one and should therefore be short-lived. Macro conditions are still not favourable despite the large fiscal and monetary action, and the uncertainty introduced by the virus persists. Interestingly, while the VIX index fell nearly 14% over the week, it remains elevated at 65.5. For context, the VIX has an historical beta of approximately -3 to the S&P 500, implying a 30% drop against the S&P 500’s 10.3% rebound last week.

In our view, this reflects an environment that remains challenging for risky assets. And while one of three triggers we have identified as necessary to re-enter the market has been hit (fiscal/monetary policy support), the other two (improving health conditions and pricing of a significant recession in markets) are still missing. This motivates our view to remain defensive and look for only the most appealing of opportunities that would directly benefit from fiscal and monetary support (e.g., US investment grade credit on the back of the Fed’s corporate bond purchasing program). Finally, we are closely monitoring liquidity in financial markets as a cash squeeze could trigger another major downturn in markets.

Weekly Change

  • Our world Growth Nowcaster decreased sharply last week, as US data pointed to a rapid entry into a recession.
  • Our world Inflation Nowcaster is currently following suit with the growth one as commodities plunged again.
  • And our Market Stress Nowcaster remains elevated but has stabilised as credit spreads narrowed over the week.

Sources: Unigestion. Bloomberg, as of 30 March 2020.

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Simple blood test could predict risk of long-term COVID-19 lung problems

UVA Health researchers have discovered a potential way to predict which patients with severe COVID-19 are likely to recover well and which are likely to…

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UVA Health researchers have discovered a potential way to predict which patients with severe COVID-19 are likely to recover well and which are likely to suffer “long-haul” lung problems. That finding could help doctors better personalize treatments for individual patients.

Credit: UVA Health

UVA Health researchers have discovered a potential way to predict which patients with severe COVID-19 are likely to recover well and which are likely to suffer “long-haul” lung problems. That finding could help doctors better personalize treatments for individual patients.

UVA’s new research also alleviates concerns that severe COVID-19 could trigger relentless, ongoing lung scarring akin to the chronic lung disease known as idiopathic pulmonary fibrosis, the researchers report. That type of continuing lung damage would mean that patients’ ability to breathe would continue to worsen over time.

“We are excited to find that people with long-haul COVID have an immune system that is totally different from people who have lung scarring that doesn’t stop,” said researcher Catherine A. Bonham, MD, a pulmonary and critical care expert who serves as scientific director of UVA Health’s Interstitial Lung Disease Program. “This offers hope that even patients with the worst COVID do not have progressive scarring of the lung that leads to death.”

Long-Haul COVID-19

Up to 30% of patients hospitalized with severe COVID-19 continue to suffer persistent symptoms months after recovering from the virus. Many of these patients develop lung scarring – some early on in their hospitalization, and others within six months of their initial illness, prior research has found. Bonham and her collaborators wanted to better understand why this scarring occurs, to determine if it is similar to progressive pulmonary fibrosis and to see if there is a way to identify patients at risk.

To do this, the researchers followed 16 UVA Health patients who had survived severe COVID-19. Fourteen had been hospitalized and placed on a ventilator. All continued to have trouble breathing and suffered fatigue and abnormal lung function at their first outpatient checkup.

After six months, the researchers found that the patients could be divided into two groups: One group’s lung health improved, prompting the researchers to label them “early resolvers,” while the other group, dubbed “late resolvers,” continued to suffer lung problems and pulmonary fibrosis. 

Looking at blood samples taken before the patients’ recovery began to diverge, the UVA team found that the late resolvers had significantly fewer immune cells known as monocytes circulating in their blood. These white blood cells play a critical role in our ability to fend off disease, and the cells were abnormally depleted in patients who continued to suffer lung problems compared both to those who recovered and healthy control subjects. 

Further, the decrease in monocytes correlated with the severity of the patients’ ongoing symptoms. That suggests that doctors may be able to use a simple blood test to identify patients likely to become long-haulers — and to improve their care.

“About half of the patients we examined still had lingering, bothersome symptoms and abnormal tests after six months,” Bonham said. “We were able to detect differences in their blood from the first visit, with fewer blood monocytes mapping to lower lung function.”

The researchers also wanted to determine if severe COVID-19 could cause progressive lung scarring as in idiopathic pulmonary fibrosis. They found that the two conditions had very different effects on immune cells, suggesting that even when the symptoms were similar, the underlying causes were very different. This held true even in patients with the most persistent long-haul COVID-19 symptoms. “Idiopathic pulmonary fibrosis is progressive and kills patients within three to five years,” Bonham said. “It was a relief to see that all our COVID patients, even those with long-haul symptoms, were not similar.”

Because of the small numbers of participants in UVA’s study, and because they were mostly male (for easier comparison with IPF, a disease that strikes mostly men), the researchers say larger, multi-center studies are needed to bear out the findings. But they are hopeful that their new discovery will provide doctors a useful tool to identify COVID-19 patients at risk for long-haul lung problems and help guide them to recovery.

“We are only beginning to understand the biology of how the immune system impacts pulmonary fibrosis,” Bonham said. “My team and I were humbled and grateful to work with the outstanding patients who made this study possible.” 

Findings Published

The researchers have published their findings in the scientific journal Frontiers in Immunology. The research team consisted of Grace C. Bingham, Lyndsey M. Muehling, Chaofan Li, Yong Huang, Shwu-Fan Ma, Daniel Abebayehu, Imre Noth, Jie Sun, Judith A. Woodfolk, Thomas H. Barker and Bonham. Noth disclosed that he has received personal fees from Boehringer Ingelheim, Genentech and Confo unrelated to the research project. In addition, he has a patent pending related to idiopathic pulmonary fibrosis. Bonham and all other members of the research team had no financial conflicts to disclose.

The UVA research was supported by the National Institutes of Health, grants R21 AI160334 and U01 AI125056; NIH’s National Heart, Lung and Blood Institute, grants 5K23HL143135-04 and UG3HL145266; UVA’s Engineering in Medicine Seed Fund; the UVA Global Infectious Diseases Institute’s COVID-19 Rapid Response; a UVA Robert R. Wagner Fellowship; and a Sture G. Olsson Fellowship in Engineering.

  

To keep up with the latest medical research news from UVA, subscribe to the Making of Medicine blog at http://makingofmedicine.virginia.edu.


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Looking Back At COVID’s Authoritarian Regimes

After having moved from Canada to the United States, partly to be wealthier and partly to be freer (those two are connected, by the way), I was shocked,…

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After having moved from Canada to the United States, partly to be wealthier and partly to be freer (those two are connected, by the way), I was shocked, in March 2020, when President Trump and most US governors imposed heavy restrictions on people’s freedom. The purpose, said Trump and his COVID-19 advisers, was to “flatten the curve”: shut down people’s mobility for two weeks so that hospitals could catch up with the expected demand from COVID patients. In her book Silent Invasion, Dr. Deborah Birx, the coordinator of the White House Coronavirus Task Force, admitted that she was scrambling during those two weeks to come up with a reason to extend the lockdowns for much longer. As she put it, “I didn’t have the numbers in front of me yet to make the case for extending it longer, but I had two weeks to get them.” In short, she chose the goal and then tried to find the data to justify the goal. This, by the way, was from someone who, along with her task force colleague Dr. Anthony Fauci, kept talking about the importance of the scientific method. By the end of April 2020, the term “flatten the curve” had all but disappeared from public discussion.

Now that we are four years past that awful time, it makes sense to look back and see whether those heavy restrictions on the lives of people of all ages made sense. I’ll save you the suspense. They didn’t. The damage to the economy was huge. Remember that “the economy” is not a term used to describe a big machine; it’s a shorthand for the trillions of interactions among hundreds of millions of people. The lockdowns and the subsequent federal spending ballooned the budget deficit and consequent federal debt. The effect on children’s learning, not just in school but outside of school, was huge. These effects will be with us for a long time. It’s not as if there wasn’t another way to go. The people who came up with the idea of lockdowns did so on the basis of abstract models that had not been tested. They ignored a model of human behavior, which I’ll call Hayekian, that is tested every day.

These are the opening two paragraphs of my latest Defining Ideas article, “Looking Back at COVID’s Authoritarian Regimes,” Defining Ideas, March 14, 2024.

Another excerpt:

That wasn’t the only uncertainty. My daughter Karen lived in San Francisco and made her living teaching Pilates. San Francisco mayor London Breed shut down all the gyms, and so there went my daughter’s business. (The good news was that she quickly got online and shifted many of her clients to virtual Pilates. But that’s another story.) We tried to see her every six weeks or so, whether that meant our driving up to San Fran or her driving down to Monterey. But were we allowed to drive to see her? In that first month and a half, we simply didn’t know.

Read the whole thing, which is longer than usual.

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The hostility Black women face in higher education carries dire consequences

9 Black women who were working on or recently earned their PhDs told a researcher they felt isolated and shut out.

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Isolation can make opportunities elusive. fotostorm via Getty Images

Isolated. Abused. Overworked.

These are the themes that emerged when I invited nine Black women to chronicle their professional experiences and relationships with colleagues as they earned their Ph.D.s at a public university in the Midwest. I featured their writings in the dissertation I wrote to get my Ph.D. in curriculum and instruction.

The women spoke of being silenced.

“It’s not just the beating me down that is hard,” one participant told me about constantly having her intelligence questioned. “It is the fact that it feels like I’m villainized and made out to be the problem for trying to advocate for myself.”

The women told me they did not feel like they belonged. They spoke of routinely being isolated by peers and potential mentors.

One participant told me she felt that peer community, faculty mentorship and cultural affinity spaces were lacking.

Because of the isolation, participants often felt that they were missing out on various opportunities, such as funding and opportunities to get their work published.

Participants also discussed the ways they felt they were duped into taking on more than their fair share of work.

“I realized I had been tricked into handling a two- to four-person job entirely by myself,” one participant said of her paid graduate position. “This happened just about a month before the pandemic occurred so it very quickly got swept under the rug.”

Why it matters

The hostility that Black women face in higher education can be hazardous to their health. The women in my study told me they were struggling with depression, had thought about suicide and felt physically ill when they had to go to campus.

Other studies have found similar outcomes. For instance, a 2020 study of 220 U.S. Black college women ages 18-48 found that even though being seen as a strong Black woman came with its benefits – such as being thought of as resilient, hardworking, independent and nurturing – it also came at a cost to their mental and physical health.

These kinds of experiences can take a toll on women’s bodies and can result in poor maternal health, cancer, shorter life expectancy and other symptoms that impair their ability to be well.

I believe my research takes on greater urgency in light of the recent death of Antoinette “Bonnie” Candia-Bailey, who was vice president of student affairs at Lincoln University. Before she died by suicide, she reportedly wrote that she felt she was suffering abuse and that the university wasn’t taking her mental health concerns seriously.

What other research is being done

Several anthologies examine the negative experiences that Black women experience in academia. They include education scholars Venus Evans-Winters and Bettina Love’s edited volume, “Black Feminism in Education,” which examines how Black women navigate what it means to be a scholar in a “white supremacist patriarchal society.” Gender and sexuality studies scholar Stephanie Evans analyzes the barriers that Black women faced in accessing higher education from 1850 to 1954. In “Black Women, Ivory Tower,” African American studies professor Jasmine Harris recounts her own traumatic experiences in the world of higher education.

What’s next

In addition to publishing the findings of my research study, I plan to continue exploring the depths of Black women’s experiences in academia, expanding my research to include undergraduate students, as well as faculty and staff.

I believe this research will strengthen this field of study and enable people who work in higher education to develop and implement more comprehensive solutions.

The Research Brief is a short take on interesting academic work.

Ebony Aya received funding from the Black Collective Foundation in 2022 to support the work of the Aya Collective.

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