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The Global Economy Plunged Into Recession In February 2020

Disruptive Investor profile picture
Disruptive Investor


  • The global purchasing manager index has declined sharply in February 2020.
  • The Baltic dry index indicates sluggish global trade, which can remain depressed in the coming months.
  • Oil price plunge will further impact global GDP growth.
  • Gold and gold mining stock are attractive.

Article Overview

As the coronavirus outbreak spreads globally, there are increasing uncertainties on the outlook for the global economy. The stock market plunge coupled with a sharp decline in oil prices is already indicating that GDP growth can be muted in the first half of the year.

This article will discuss some key indicators of the global economy and the implication of these on asset classes. Based on the likely trend in asset classes, the article will discuss the portfolio allocation for the near to medium term.

The Global Economy Was In Recession in February 2020

A good indicator of global economic activity is the Purchasing Manager Index for the manufacturing and the services sector.

The chart below gives the global PMI for the month of February 2020.

Global Recession February 2020

It is clear that both manufacturing and services activity plunged in February 2020. The composite index was at 46.1 indicating that the global economy was potentially in a recession for the month.

This explains the recent rate cut of 50 basis points by the Federal Reserve. This also explains why Goldman is expecting another 75 basis points rate cut by June.

Since the coronavirus continues to spread globally, there is unlikely to be any respite for the economy in March 2020. It would not be surprising if the global GDP growth is negative for the first quarter of 2020.

It is worth noting that 10-year Treasury yield has already plunged to 0.70% and this elaborates on the extent of risk-off trade in the markets.

The Plunge in the Baltic Dry Index

Another good indicator of the level of global economic activity and global trade is the Baltic Dry Index.

As the chart below shows, the Baltic Dry Index is near the levels seen during the financial crisis of 2008-09.

Baltic Dry Index Plunge 2020

While the index

This article was written by

Disruptive Investor profile picture
Analyst with interest in various asset classes for portfolio diversification. My field of expertise includes equities, precious metals, commodities and cryptocurrencies. Special interest and love for economics.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (13)

Ben Gee profile picture
It take 2Q of negative growth to be a recession. NOT one month.
hahaha48 profile picture
please look at the real world.
business here in the USA many of them will shut down for months.
Most of the restaurants I go to will be closed for months starting this months. I eat out every day.
Just think how many people will be unemployed in the USA and all over the world in the coming months. there is no way out now, recession globally will happen in 2020. there is a great chance every country will enter recession in 2020.
h_oliver88 profile picture
I am wondering whetever the author have friends in China or been in China in the past 1.5 month. Because Obviously the Virus will be contained at one point thats 100% sure, but i dont think that the author fully understand the severe impact on the economy of this virus. As of now in many provinces in China was no new infections for a week or longer, but about half of the stores are still closed, and those which arent closed dont have any traffic unless its offering essentials. The monument of this crazy demand drop is truly unprecedented by many scale. I am very sure it could be only comparable to the great depression Consumer demand drop nothing else. I do believe that there will be serious dent on the virus hit countries consumption habits months after the virus is gone. At this point i can say the chances of a global economic recession is 75-80% and as the SH.. start to hit hard the windshield in the US,and many investors and fund managers start to see the crazy impact on consumption the markets going to drop a lot more. I say this all with the experience of living in Guangzhou China during the pandemic, as i know whats coming to the rest of the world. I am an optimistic person by nature, but facts are facts. I recommend for investors to hold liquidity,and dont buy the lets rush and buy the dip speeches. The best opportunities are later to come once the US crossed 10 000 cases and some states will be locked just like in Italy, because you can bet it will come. 

A warm reminder for business owners in Europe and North America i recommend that your business have enough liquidity to last upto 4-5 month without much, or dismal revenue, because thats a possibility coming and the unprepared will going to bust.
Contained? Ok. Can you contain the air of the world? Hate to break it to you, but it is clear this disease is a GLOBAL health crisis now. Look at what is currently happening in Italy. 17 days ago they had 20 cases. Today their ENTIRE NATION is quarantined.
I think he was speaking broadly, that at some point say 2 years from now we will have some usable vaccine.
Ben Gee profile picture
CV is contained in China, the same for the rest of the world in about 1 month.
Good article. Thanks!
The tip of the iceberg at this point in time.
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