Market Perspective

Market Perspective: The Ripple Effects to the Global Economy

March 26, 2020
The C2FO Team

Over the last three months, the new coronavirus has spread to almost every country, infecting more than 800,000 people worldwide. Each day, that number continues to rise.  

The virus has also infected our global economy. In an effort to flatten the curve, countries have responded by enacting a wide range of policies — from mandatory quarantine to suggested social distancing — to address the spread of COVID-19. 

However, the very policies enacted to protect citizens from the virus have left them vulnerable to the consequences of a global economic crisis. Social restrictions have had negative effects on businesses of all sizes, triggering supply chain disruption and mass unemployment. 

As the economic effects of the coronavirus reveal themselves, we’re beginning to understand the far-reaching consequences COVID-19 will have on businesses large and small. 

Ashish Jain, senior vice president and head of capital markets for C2FO, breaks down the key impacts we’re seeing this week:


Jobless claims are the single biggest economic indicator that the U.S. economy has come to a halt, Jain said. 

Last week, applications for unemployment benefits hit 3.3 million. That’s an increase of more than 1000% over the previous week’s 281,000 jobless claims. 

Economists predict Pennsylvania — the nation’s fifth-most populous state — and its outsized spike in unemployment claims could suggest other states may soon report higher numbers. 

Jobless claims in Pennsylvania rose from nearly 15,500 to more than 370,000 last week

Jain said other states may be accepting a high volume of delayed filings in the coming weeks, which could mean rising jobless claims as the pandemic continues to affect the labor market.  

“We could see more stress to the labor market as other states catch up on processing claims and more people seek unemployment benefits,” Jain said. 

The disruption to modern society has been swift, placing enormous pressure on state governments to take on the financial burden from social shifts and job losses. 

Policies enacted by state governments like non-essential business closures and mandatory quarantines have compounded job losses across multiple industries. 

Although social distancing seems antithetical to fighting a normal economic crisis, public health officials caution against relaxing restrictions too quickly, as the economic and humanitarian consequences of putting the world back to work could be more devastating. 


On Friday, President Trump signed into law a historic $2 trillion economic relief package that will extend aid to struggling Americans while also offering loans, grants and tax relief to businesses. 

It’s difficult to conceive how big $2 trillion is. To put that number in perspective, it is equivalent to about five weeks of U.S. GDP. 

The stimulus package includes about $500 billion in loans and assistance to larger companies, while offering nearly $350 billion in aid for small businesses. The aid for small businesses would  come from the Small Business Administration (SBA) and banks, guaranteed by the federal government. 

Unfortunately, the majority of businesses will run out of money long before SBA loans, or financial assistance, can be provided. This will lead to a higher and longer duration of unemployment. 

Nearly half of small businesses in the country have 27 or fewer days of a cash buffer to cover expenses if revenue suddenly stops. For the small businesses in the retail sector, that number slips to 19 days, while restaurants only have about 16 days of cash on hand. 

The Federal Reserve has also taken unprecedented steps to offer relief to American businesses. The central bank has added more than $1 trillion to the financial system in recent weeks. 

The sheer magnitude of consequences is so far-reaching that this global pandemic has left no industry untouched. 

Unlike the 2008 financial crisis, the federal reserve is focused not just on preserving the banking system, but supporting everything from treasuries to mortgages to corporate bonds to money market funds, Jain said. 

Economists expect the crisis to cost the U.S. economy as much as five million jobs this year and $1.5 trillion in lost output.


As more Americans face financial hardship due to the shutdown of the U.S. economy, rent payments from tenants to property owners could turn a health crisis into a banking crisis as well. 

Some cities — like New York and Los Angeles — have placed a moratorium on evictions, but as more Americans lose access to cash, rent freezes are a popular topic of discussion. 

On Friday, the stimulus bill put a temporary, nationwide eviction moratorium in place for any renters whose landlords have mortgages backed or owned by Fannie Mae, Freddie Mac and other federal entities which will last for 120 days.

But if commercial tenants don’t pay rent because of a lack of cash, a ripple effect could ensue, Jain said. 

Without rent payments, property owners might default on their mortgage payments, affecting large U.S. banks that will suffer sharp losses on their loans. 

Key Takeaway 

As the coronavirus outbreak halts cash flows of all kinds, state and federal governments are stepping up to ease the consequences. 

On Friday, the U.S. will release the March jobs report, the first to reflect the impact of business shutdowns to prevent the coronavirus’s spread. The numbers are based on the week ending March 14, which preceded the worst impact. Even so, Bloomberg estimates it could be the first monthly payroll decline since 2010.

These steps to ensure economic relief are likely just first steps and we can expect to see additional relief packages in the coming weeks. 


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