Only the UK and China taking the right fiscal and monetary measures

After yesterday, the S&P 500 dropped below its Mondays close. But only to be followed by Mr. Trumps travel ban, which put pressure on global futures market.

Everybody was expecting that after the UK in the morning the US will follow with fiscal stimulus to support the FED.

There is no global coordination like we have seen in 2008. America first means there will be no global crisis management.

This will impact the US election process, so far Trump is a poor crisis manager for the US and the US is not intending to globally take the lead like in the past.

By the contrary every country looks only for themselves:

E.g. goods (a lot from China) are blocked in German harbors and not distributed in Europe. In Italy the public life came to a standstill while in UK beside fiscal and monetary measures not much more has been implemented to deal with the virus.

Today we will see the ECB announcing probably some monetary measures. BUT without fiscal stimulus we might see a similar effect like we have seen after the panic rate cat from the FED.

1. Although in China all started the best corporate credit market and the best performing equity market can be found there!

1. China has reach the peak of new infected people, probably Korea will be there soon. Italy might arrive there in one week. I.e. the 2^nd derivative (aka the slope of the line) reaches a horizontal line

1. If China is the blue-print Korea and Italy start to decline soon (3rd chart).

1. COVID 19 (ill cases) from today paint a similar picture

1. CDS in Italy are reaching levels last seen in 2018 during the political crisis

1. EuroStoxx might soon reach a buying level

• Investment grade bonds (i.e. not junk or High yield bonds) trade now at spreads like in 2008! I.e. this as well indicates that a buying opportunity cannot be too far away

1. Global growth might slow down to around 0% in Q1 2020, but so far for the whole year we cloud still see 2% (before the estimates were slightly above 3%)

Published: 12/03/20 by Blackfort CIO Dr. Andreas Bickel

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