Speaking on NBC’s “Meet the Press,” Pence said the U.S. economy was on a solid enough footing to withstand the outbreak-related turbulence that has rocked markets. Major Wall Street indexes suffered their worst week since the financial crisis last week amid a virus-driven equities selloff and the associated lurch towards safe-haven assets.
“The fundamentals of this economy are strong,” Pence said, according to reports. “We just saw some new numbers come out in housing and consumer confidence and business optimism. Unemployment’s at a 50-year low. More Americans working than ever before.”
Pence added, “This economy will—and particularly the stock market that, that saw some downturns this week—it will come back. But our focus is going to remain on the health and well-being of the American people.”
Last Wednesday, President Donald Trump put Pence in charge of efforts to coordinate American agencies’ response to the coronavirus threat.
To date, some 70 virus cases have been confirmed in the United States, with Federal officials on Saturday announcing America’s first COVID-19 death in Washington state, identifying the casualty as a male in his 50s with underlying health problems.
‘Markets Have Gone Too Far’
Pence’s confidence in the resilience of the U.S. economy follows remarks made by top White House economic adviser Larry Kudlow, who on Friday tried to calm panicked markets.
“People should not overreact,” Kudlow told reporters at a White House briefing amid Friday’s fear-driven selloff. He added that he believed markets would rebound “very rapidly.”
“The market’s the market,” Kudlow said, adding: “My reading of the numbers that we have at hand—and I acknowledge this could change, I acknowledge the situation could deteriorate, I acknowledge the risks—but given what we know factually, it looks to me like the market has gone too far.”
“I’m not saying that the market’s wrong,” Kudlow said. “It is what it is. You’ve got millions of people trading all around the world. But I just think everybody, whether you’re an investor or whether you’re an ordinary main street person, people should not overreact.”
‘More Likely Than Not’ Expansion Continues
Precedent suggests large-scale outbreaks of disease may have a limited impact on both markets and the economic business cycle.
“Historically, events like SARS, Ebola, and Fukushima tend to have a negative economic impact, but are not dominant factors behind business cycles,” said senior financial analyst Nick Reece, in an emailed statement. On balance, economic indicators suggest more upside than downside for the U.S. economy, he added.
“It seems more likely than not that the expansion continues in the coming several months,” Reece said.
Commenting on the depth of last week’s equities plunge, Reece said equity market indicators similarly suggest further upside in the bull market.
“I would say this is at the very least a sharp correction,” he said of the selloff, adding that there are “no guarantees that we’ve seen the worst in the markets yet.”
Still, he said the data “looks historically inconsistent with the start of a major bear market.”
“An interesting historical perspective is that the Dow traded up through 1918 and 1919 with the Spanish flu arriving in the spring of 1918,” he added.
According to the CDC, the 1918 influenza pandemic was the most severe pandemic in recent history, with the number of deaths estimated to be at least 50 million worldwide and about 675,000 in the United States.
“There are a lot of legitimate concerns and unknowns with regard to the impact of the virus,” Reece acknowledged, adding that black swan events pose an ever-present risk.
“This move is a good reminder that markets don’t follow a normal distribution, fat tails are a feature of markets,” he said.