Saturday, 28 March 2020

Thoughts from the last week

Well, what a last few weeks. Volatile markets, a global pandemic and far too many utterances of the phrases 'whatever it takes' and 'black swan'. 

My thoughts on it all?  Naturally this evolves but as I noted earlier in the week:

As the striking pictures from all large cities across China during and immediately after late January’s Lunar New Year attested and more recently in Europe from late February, trying to control COVID-19 via the use of quarantines and / or rigorous health checks, has a dramatic effect on day-to-day life and economic activity. You do not need to be highly schooled in the theory of the economic multiplier to envisage the impact of the cancelling of a conference or the closure of a school, let alone the impact of a moribund economy or the psychological and behavioural impact of a period of widespread forced working from home.

And then there is the dynamic supply chain disruption. All but the most local of businesses in the world now have extensive and deeply international supply chains, a trend that has only been furthered by digital commerce with its emphasis on price arbitrage and reliance on complex logistics. Most European or emerging market businesses are deeply dependent on international supply chains. 

By putting these effects together, there is little surprise that economic growth projections across the world for the first couple of quarters of 2020, have been reduced at a speed unprecedented outside times of overt economic depression or a very destructive war. The full implications are still being worked through, but the clearly extraordinary response by policymakers around the world - which outside the United States have included the Bank of England reducing interest rates to their lowest level for over 325 years and a raft of lending and direct worker assistance initiatives announced by governments around the world - reflect the severity of the COVID-19 outbreak and the need to shorter-term protect economic systems. 

However there is hope.  Policymakers have been very proactive and countries in east Asia including China and South Korea - who tentatively have culled their COVID-19 outbreak to very negligible levels - have provided insights into how countries in the rest of the world can start to fully emerge from the restrictions and impacts of the virus. Life does not naturally spring back to normal, otherwise the risk of mini outbreak crises (which clearly could become again major ones) becomes apparent, however the state of emergency can slowly pass.  This will be a focus for Europe in particular in April, with countries such as Italy and Spain - agonisingly in the vanguard of the spread of COVID-19 outside of East Asia - a particular focus. 

Keep safe and to quote one of the great European leaders of a previous troubled time "If you're going through hell, keep going."

It is a fast-moving situation.  As always check out my twitter feed @financial_orbit which has the most regular flow of insights that I can share.

I also talked about the financial markets and the opportunities out there in my appearance on the Vox Markets podcast on Thursday which you can listen to here.


Meanwhile on Share Prophets here are a few of my favourite articles that I wrote during the last week...

Next's change of plan tells you more than romping markets...

Hotel Chocolat – smart or lucky?

Hello the 1970s again?

...which you can read here, here and here.  

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