The US economy, along with economies around the world, is in partial lock-down. Estimates of how this will impact on economic growth vary, but the general consensus seems to be that GDP will shrink in the current quarter by between 10% and 14%. Unemployment is expected to surge from 3,5% before the pandemic to as much as 10%. Weekly jobless claims are expected to climb to around 2 million – from as little as 280 000 before the collapse. This is thought to be tolerable – so long as the lockdown does not continue for more than about 1 month. Compared to the Great Depression of 1929-1939, however, these figures are relatively mild, mainly because the contraction is expected to be much shorter. By the end of this year, most economists expect the world economy to be rapidly returning to normal. Most first world countries have dropped interest rates to close to zero and have announced massive stimulus packages (most notably, the US’s $2 trillion package). During the Great Depression unemployment in America reached as much as 33% and the contraction went on for 10 years. During the 1918 Spanish flu epidemic, 50m people died world wide and GDP declined by about 7%. Because this is a truly unique event in the financial markets, investors really do not know what to make of it. The chart below shows that they initially sold the market down sharply, but in the last five or six days there has been something of a rally.