Beware The CoronaNazis | WHAT REALLY HAPPENED

Beware The CoronaNazis

Authored by Bill Blain via,

We learn and adapt quickly.

Business and markets are arbitraging government support packages and central bank QE Infinity to stay “insanely high” despite the massive economic hit of the virus. If the proverbial Martian visited the stock market today, he’d struggle to understand just why markets are so high when prospects look so low.

At which point we come back to earth with a bump. The papers this morning are full of doom and gloom – particularly re the UK. My email is full of analyst gibberish about why I should be buying Bitcoin, Tesla and other crap. I shall ignore them all, and focus on the real picture

Even if the global economy was to magically reopen tomorrow, we’d still see earnings for 2020 massively impacted, reduced credit worthiness as companies leveraged themselves with more debt to see them through the crisis, and an increasingly protectionist trade uncurrent.

That’s not a favourable market for anyone. And we all get it – the world has changed.

Understanding the nuances of this new markets is going to be critical.

It’s not just about listening to what Fed Head Jay Powell was saying when he warned about how assets prices could be impacted by the pandemic, and how it might take 18 months for the US economy to recover. It’s not just understanding the consequences of how UK long-term unemployment might rise to 9%. It’s not even all about the 11.2% decline in US industrial production through April, or the 70% crash in car production – and the knock on effects these have across the economy.

It’s also about understanding behavioural economics – how will people and politicians (note the distinction) respond in this changed environment. What impacts will politically driven decisions and consequences have on markets going forward