Because only America (and not China) will be able to revive the world economy
A big difference compared to 2009, when China made the lion's share of bringing the world out of the crisis. The analysis by Alessandro Fugnoli, chief strategist of the Kairos funds
Noise are the positives of Covid , in some countries more numerous today than they were in spring. The signal is the sick, the hospitalized and the dead, in far fewer numbers everywhere. Noise are the epidemiologists of the obvious, calculating in hand that if the cases double every week in ten weeks, when the flu season has not yet started, we will have 1024 times the cases today. A sign is that this has never happened anywhere and that between man and virus no one can ever win over. ICUs in Bergamo, New York, Houston and Madrid took turns on the brink of disaster but all emptied out before they burst.
The rumor is that the lockdowns are around the corner and will do even more damage than in the spring, because this time the thread to which so many companies have remained clinging will break. A sign is that the bankruptcies are for now less than expected, also because it is not so impossible to avoid them (or postpone them even for years) in an era of public subsidies that are back in fashion, private equity full of money to invest, mergers and acquisitions. facilitated by abundant liquidity and by investors ready to accept debt restructuring in which the debtor is pretended to be solvent in order to continue to receive a coupon above zero. The drama is for many small and very small businesses left to themselves, but the market radar is not calibrated to perceive it.
Rumor is that inflation is about to explode to the upside, as some say, or collapse to the downside, as others say. A sign is that overall inflation is a few decimal places lower than in the pre-Covid world but remains positive, while nothing suggests dramatic changes in the next twelve months.
The American elections are deafening, as always epochal and apocalyptic in their being lived as the final battle between good and evil. To say something original about the period of turmoil that awaits us after the vote, someone even went to reread the XII Amendment, which says that in the case of parity of the electoral college, the choice of the new president will be delegated to the lower house, where they will vote for states, one vote for California and one for Wyoming, with the former having 75 times the population of the latter. The Senate, for its part, will elect the vice president, with the risk that he is from a party other than that of the president.
The signal is that the American constitution establishes that on January 30, at any cost, there will be a new president, so that from then on everything that has happened in the previous three months will be at most a footnote in the history books. . Above all, it is a sign that whoever wins will adopt an extremely expansive fiscal policy. The algebraic sum between taxes and new expenses will be practically the same not only between Biden and Trump, but also in the event of a tie, or rooms of different colors that make the weight of the White House insignificant and produce that jammed situation, the gridlock, which the markets liked so much in the past decades (and which according to the neurotic narrative of these days would instead put them in anxiety after November 3).
With any Congress and any White House, we are likely to have 4 trillion net of fiscal stimulus. Two trillion less in taxes and two trillion more expenses if the Republicans win it all. Four trillion more in taxes and eight more expenses if the Democrats win it all. Taxes unchanged and four trillion more expenses if Congress stays divided and whoever sits in the White House. The total is always four. If the economic geology, that of the great tectonic plates and their enormous energy, goes towards reflation, it will be reflation. Individual men and their influence on history, as taught in geopolitics, are vastly overrated.
Four trillion (possibly to grow, certainly not to fall) is 18 percent of the American GDP. Combined with the stimuli already circulating in recent months, it means that half of the global stimulus will eventually come from the United States. A big difference compared to 2009, when China made the lion's share of bringing the world out of the crisis.
Returning to the signals and noises, noise is the high volatility of the markets. The signal is that the September crisis has cleared the stock markets of bullish hysteria (in the first two weeks) but also of bearish ambitions, severely punished in the subsequent recovery. Today, the positioning is balanced and the market is ready for new upside exploration without the weight of too high leverage.
As for the sectors, the rumor is that Biden, the new Theodore Roosevelt, will wage war on the great champions of technology. The document just approved by the lower house on the new monopolies actually has a different and harsh language and gives even more to think about if we remember the very close historical link between the Democrats and Silicon Valley. The background signal, however, is more nuanced.
The geopolitical geology of the centuries-old conflict between the United States and China requires a response from the American side that defends the national champions of technology, but also demands that they do not stifle innovation and the growth of a rich and articulated research fabric around them. .
Rather than disrupting the existing in the name of some ideological principle, an America that is on its way to becoming a war economy (albeit cold, technological and economic) has a vital need for a solid and at the same time lively economic structure. . Californian Harris, who will succeed Biden sooner or later, has built her entire political career in San Francisco and will be an important mediator between the old and new Silicon Valley.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/perche-solo-lamerica-e-non-la-cina-potra-risollevare-leconomia-mondiale/ on Sun, 11 Oct 2020 07:06:37 +0000.