Mar 19, 2020 - Economy & Business

Investors increasingly fear coronavirus fallout will be worse than 2008

Illustration: Aïda Amer/Axios

"Try to remember how you felt in September 2008, right when you learned Lehman collapsed. Were you more scared then, or are you more scared now?"

The intrigue: That's a question I've been asking investors and other sources since late February. When I began, the responses were pretty evenly split.

  • This week, all but two people said they are more scared now — and that majority includes several big names who were previously siding with 2008.

The argument in favor of 2008 being scarier is that no one knew if the pit had a bottom, or if we'd just spiral endlessly — vacuuming up Main Street after Wall Street.

  • Our present slide, while horrific, will eventually end — if not because of social distancing, then because scientists discover treatments and/or vaccines.

The argument for 2020 is that Main Street and much of Corporate America are being eviscerated simultaneously.

  • Wall Street may be relatively immune so far, outside of plunging equity prices and M&A fee interruptions, but Wall Street is just a lubricant for the American economy — it's not the pistons. And if we begin to see a large wave of corporate defaults, both Wall Street and private equity will feel a suffocating squeeze of their own.
  • Add to this the fear of sickness and death, particularly for older Americans, neither of which we experienced in 2008.

The bottom line: While we are always captive to the present, it is objectively reasonable to call this the most fraught moment of our collective lives. Decisions that get made over the next several days and weeks, including the White House's $1 trillion stimulus proposal that many think is too small, will be consequential for most everything ever again covered in this newsletter, or in media like it.

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Corporate America balks at potential strings attached in relief package

Illustration: Sarah Grillo/Axios

Uncle Sam today will become Corporate America's lender of last resort, but it's still unclear if it also will become its activist shareholder.

Driving the news: We're still awaiting full text of the bipartisan deal struck last night between the White House and Senate leaders, including if there will be any straight equity or warrants tied to financial help for affected industries and companies.

96% of small business owners are already feeling coronavirus impact

Photo: Andrew Lichtenstein/Corbis via Getty Images

More than half of U.S. small business owners say their business will not be able to continue operating more than three months due to economic strain caused by the coronavirus pandemic, according to a Goldman Sachs survey of more than 1,500 small business owners conducted March 16-17.

Why it matters: Much of the conversation around the economic effects of the outbreak has centered on the stock market and bailouts for large corporations, but its most acute impacts are being felt on Main Streets around the country.

Hotel industry warns of looming financial crisis

Illustration: Sarah Grillo/Axios

Hotel industry lobbying groups have fired a warning shot, exhorting lawmakers to provide them with financing to avoid a series of debt defaults they say could set off a widespread financial crisis.

Why it matters: Without the bailout — which would be in addition to government funds from the $2 trillion CARES Act — the industry says its members could be the first in a wave of debt defaults that would hit everyone from real estate investors and pension funds to average homeowners.