AG Macro Brief - 10 Mar 2020
It was doomsday scenario with the sort of carnage most market participants have not experienced. The major indices were limit down at one point.
The geopolitical landscape changed and so did the complexity of the outlook. Russia was unwilling to cut production, to support the oil market , to support global stability. And Saudi decided to show who is boss in the oil business. They reset global oil prices much lower.
For Russia their move backfired. A 30% plunge in oil prices is not something you see everyday. It destabilizes US shale producers and becomes a threat to US banks and creditors. It mainly destabilizes Russia and puts them on default watch. Memories of 1998 comes back.
This could really force the global economy on recession watch. Central banks have to respond. US will have to support the shale companies with aid to keep them afloat.
Countries or regimes that are highly dependent on oil revenue will see a cascade of global debt defaults.
Today, markets are in big bounce after Trump has proposed tax cuts and other help for workers. In many ways, Trump is in denial of the coronavirus situation. This is driving the media and his opponents mad and to be hard on Trump. This has also added to excessive volatility. I don’t think Trump is fully blind to this. He has a game plan. Whether it will work or not is another matter.
He will want the Fed to cut rates to zero. The markets are already demanding that and he will also introduce massive fiscal policy. He does not care about the future. That is some other presidents problem. But for the next four years he will run all stops to retain his power.
If Biden is the Democratic candidate, God save the Democratic Party. From the gaffes he has made so far, I don’t think he can last through a debate with Trump. Remember Rick Perry, Trump’s Energy Secretary, he lost all his chances to be in the presidential race for the Republican Party when he couldn’t remember an answer to a simple off the cuff question. Biden will struggle with simple issues big time.
It is going to be a very ugly election. Who knows, if the virus issue persists, Trump may even call off the election and crown himself the emperor of USA.
Stay safe!
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.