All change, but where to?

It has been clear for a while that Covid-19 would be a big shock to the global economy, but early predictions of a quick rebound, and a return to normal, now look fanciful. I am now inclined to believe that just about everything will change. My old colleague, and good friend, Jonathan Tepper is musing on a similar note in a recent piece on Unherd.com. I recommend that you go read it; it’s a great piece. For my part, I’ll split my arguments into two observations, not necessarily market-related, but both are key to understand the evolution of markets and the economy in the next few quarters, and I would suggest, beyond as well. We are not even through the first quarter yet, but it’s fair to say that the first chart on my next page already is the chart of the year. It portrays the “optimal” strategy to combat the virus relative to doing nothing, and a policy  of loose mitigation. Leaving the Chinese and South Korean outbreaks aside—as well as the grim disaster unfolding in Iran—I think it’s fair to make two overall points. Firstly, there has been a significant debate about the correct strategy to combat the virus. The responses have been scattered on a spectrum ranging from (unconfirmed?) pictures of Chinese authorities welding doors shut to apartment blocks to halt the spread, over to “herd immunity”. Or, as former SAS soldier Ant Middleton’s suggests; “fuck Covid-19”, a statement that he, in fairness, has now retracted. 

Do you want to read the rest? Click here for the PDF.