COVID-19 went global this week and markets have taken noticed (they’ve tumbled). We’ve commissioned Exclusives around the virus. In our first one, former NY Fed economist, Dominique Dwor-Frecuat, writes on the real possibility of the Fed cutting rates in their March meeting. Then we have former Deutsche Bank EM economist, Caroline Grady, look at India’s relative insulation from the economic fallout of the virus.
We are also launching a series of indicators that we will regularly update. The first looks at the odds of a US recession this year (hint: it’s rising). The second tracks the countries where the coronavirus is spreading fastest. Finally, we track what prediction markets are telling us about US elections, especially who will win the Democratic nomination for Presidential candidate.
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COVID-19 went global this week and markets have taken noticed (they’ve tumbled). We’ve commissioned Exclusives around the virus. In our first one, former NY Fed economist, Dominique Dwor-Frecuat, writes on the real possibility of the Fed cutting rates in their March meeting. Then we have former Deutsche Bank EM economist, Caroline Grady, look at India’s relative insulation from the economic fallout of the virus.
We are also launching a series of indicators that we will regularly update. The first looks at the odds of a US recession this year (hint: it’s rising). The second tracks the countries where the coronavirus is spreading fastest. Finally, we track what prediction markets are telling us about US elections, especially who will win the Democratic nomination for Presidential candidate.
Enjoy!
Bilal
COVID-19 And The Fed: Our Currency, Our Problem Too (3 min read) The Fed will probably ease in March, in part to help China avoid a hard landing.
Fed funds futures are currently pricing about 1/4 chance of a 25 bp cut at the Federal Open Market Committee (FOMC) meeting on 18 March. I believe that probability is closer to 2/3 for the following 5 reasons.
First, in the runup to the FOMC March meeting, we are likely to see more evidence that COVID-19 early containment is unlikely, as well as more instances of the virus’ negative economic and market impact. As the country where the epidemic is most advanced, China appears most exposed…
(Dominique Dwor-Frecaut | 27th February, 2020)
India: Asia’s Insulated Economy (3 min read) COVID-19 is significantly impacting Asian economies. But India’s relatively small manufacturing base and low integration into global supply chains leaves it much less exposed to the economic fallout. A small share of tourism exports also insulates the economy from a potential slump in global tourism, while lower oil prices will act as a tax cut.
Last year witnessed a protracted slowdown in economic growth, but that also looks to be bottoming out. The services PMI hit a seven-year high in January and business optimism has improved.
Credit growth remains sluggish, but the earlier negative credit impulse has eased.
(Caroline Grady | 27th February, 2020)
US Recession Probabilities (1 min read) With markets in turmoil, we thought it time to track the chances of a US recession in the next 12 months. We follow two estimates. The first uses a version of the NY Fed model which relies on the US yield curve. The more inverted the curve, the higher the odds of recession. The second is the consensus of economists recession probability forecasts…
(Bilal Hafeez | 27th February, 2020)
COVID-19 Country Tracker (1 min read) The COVID-19 virus is spreading around the world, so while much has written and analysed around China, we now need to understand its global reach. At the basic level, it is hard to keep track of new countries reporting COVID-19 cases and also which countries are seeing the largest increases. We will therefore start to track these data points.
Our latest data, which covers the past week, shows that Italy, Spain, Iran and Korea have seen the largest percentage increases in cases. Italy and Korea have been widely reported, Spain less so. Moreover, the US and Germany are seeing large increases too…
(Bilal Hafeez | 27th February, 2020)
US Election Tracker (1 min read) The US election season is in full swing. The focus right now is on who will win the Democrat nomination for Presidential candidate. With the Super Tuesday primaries almost upon us (March 3), we could find out quite soon. To help track the election drama, we like to follow prediction market odds of various candidates winning the nomination. The latest data shows Sanders as the clear front-runner with Biden and Bloomberg tied for second. The chances of Buttigieg and Warren currently seem low…
(Bilal Hafeez│27th February, 2020)
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)