That Was the Week that Was



Some of you will remember TW3, the show that launched David Frost in the swinging 60s. As a satirical program it was well ahead of its time and we couldn’t wait for Friday to come around for the next episode.

After this week that was, I guess we are all looking forward to Friday night and some respite from the relentless market volatility. We are still in the dark regarding coronavirus statistics with which the markets are preoccupied, but seem to be less concerned about the potential dislocation to the gloabl economy. In China flight departures from all airports are down 80% since mid January which gives you an idea of how “shut” China is. If this only translates in part to the economy as a whole then China is in a lot more trouble and, by extension, so is the rest of the world.

Comparisons with SARS are meaningless as China is now the world’s largest exporter and in 2003 we were coming out of the bust of the TMT (technology, media and telecoms) bubble, not a recent market peak. How prepared are we for further escalation? In 2018 Trump sacked the team at the CDC (Centre for Disease Control) that dealt with epidemics – too expensive we didn’t need them…

He has put the VP in charge of Virus Control, but this could be his downfall. If the US succumbs, as is very likely, and the government response is not adequate (think New Orleans after Katrina) the the Presidential race could well be between Pence and Bernie! That would give the market something else to think about…

The Fed have announced that they will be having an emergency meeting over the weekend, having already said that they are out of ammunition and that a fiscal response is what is needed. Neither that nor a rate cut will stop the spread of a virus, but the market wants more “munnee” and cheaper please, but it may be disappointed. Only this week a member of the FOMC suggested that the market should stop placing reliance on the Fed “put”.

Coping with the recession that looks increasingly likely as global businesses start shutting down, the Fed will need as much in its armoury as it can muster. Why waste it now?