January 2020 Newsletter

Over the 4th quarter of 2019, US GDP grew at 2.1%, an increase from 1.9% in the previous quarter. While such a rate might have been worrisome in the past, many economists believe 2% growth is to be expected for the global economy for the coming decades. Meaning, the days of expecting huge growth from the domestic economy are over. 

While growth in the American economy remains steady, Boeing, a Bellwether of the American manufacturing industry and the country’s largest exporter, continues its rapid decline. Boeing‘s failed 737 MAX experiment led to its worst year of losses in company history, totaling $18.4 billion. With two major plane crashes in 2019, public sentiment for Boeing is at its lowest. The company’s new CEO Dave Calhoun, however, is confident that Boeing will be put back on course and remain one of the most trusted companies in the world. 

Source: https://www.seattletimes.com/business/boeing-aerospace/boeing-doubles-the-projected-cost-of-the-737-max-grounding-to-18-4-billion/ 

The news was much worse in the European Union than in the US, where the region’s growth came in at 0.1%, bringing fears that contraction may not far behind if things don’t reverse soon. 2019 marked the EU’s worst growth rate since 2013. It appears EU-based businesses are refraining from investing in their business or hiring

new workers as the dust of Brexit has yet to settle. Until a final trade and commerce deal between the EU and Britain is negotiated, the European economy is likely to remain in limbo. 

While markets attempt to hold steady, a global health crisis could be another contributing factor to spark an economic downturn. China’s coronavirus is spreading, and shows no signs of letting up. There have already been more than 10,000 reported cases with the death toll in China topping 1,000, making it a rapidly emerging global concern. Some health experts believe the coronavirus could be worse than the SARS epidemic in 2003, which cost the global economy $40 billion in losses. Travel to China has already been restricted, and this trend will likely continue until the outbreak is contained. China’s central bank is preparing for the worst, injecting $174 billion into the country’s economy to ensure market liquidity is maintained. 

We will continue to monitor the economic climate as it changes over the coming months. Please contact our team if you have any questions. 

Warmest Regards, 

David Adefeso

References: 

https://www.reuters.com/article/us-china-health-global-markets-factbox/factbox-how-a-virus-impacts-the-economy-an d-markets-idUSKBN1ZK2HH 

https://finance.yahoo.com/news/china-inject-174-billion-liquidity-073630793.html
https://www.wsj.com/articles/boeings-woes-create-headwinds-for-u-s-economy-11580655600

https://www.seattletimes.com/business/boeing-aerospace/boeing-doubles-the-projected-cost-of-the-737-max-groundi ng-to-18-4-billion/ 
https://www.seattletimes.com/business/boeing-aerospace/boeing-doubles-the-projected-cost-of-the-737-max-groundi ng-to-18-4-billion/ 

https://www.nytimes.com/2020/01/31/business/economy/european-union-eurozone-economy.html https://www.nytimes.com/2020/01/30/business/economy/gdp-numbers.html 

https://www.cnbc.com/2020/01/31/coronavirus-just-starting-to-have-an-impact-on-global-economy-geopolitics.html https://www.nytimes.com/2020/02/10/world/asia/coronavirus-china.html 

Legal Information and Disclosures 

David Adefeso is the Chief Executive Officer of The Pacific Group. He oversees all aspects of the firm’s operations. Prior to The Pacific Group, David worked as a Wall Street Investment Banker with Wasserstein Perella & Co. and Salomon Smith Barney. There, he executed large and complex merger & acquisitions and corporate finance transactions for some of the world’s largest companies. His client base included Aetna US Healthcare, Magellan Healthcare, Allegiance Corp., HealthSouth, MedPartners, Snapple, Interpool Inc., Indigo Aviation, American TransAir, and BlueCross/BlueShields of California, Kansas City & Missouri. Prior to investment banking, David worked as a Certified Public Accountant. He attended Harvard Business School where he graduated with an MBA. Disclaimer: The views expressed are the views of David Adefeso through the period ending February 28th, 2020, and are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations to purchase or sell such securities.

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