2 to 8 March: Emergency, paging Dr Beat!

In her 1984 classic, Gloria Estefan is paging Dr Beat, as she desperately needs ‘to ease the pain’ and is about to ‘go insane.’ This analogy relates to the developments during the week: Jerome Powell, Chair of the Federal Reserve was alarmed to provide emergency assistance to global financial markets, who were ‘losing their brain.’ Although the good doctor administered some paracetamol for the pain in the amount of 50 basis points, he had to admit that he can only manage the symptoms, but not to tend to the underlying disease (nCovid-19). In our opinion, it is very unusual that the Fed delivered a step of such magnitude at an unscheduled meeting.

Dr Beat, being a generalist, did his best to slow the sell-off in the US stock markets, but his efforts were only good enough to limit the downside and floor stock prices. Consequently, we are still waiting for the specialist, i.e. the fiscal arm to step up its game and administer the much-needed adrenaline, which could stabilise financial markets vis-à-vis the economy. Given this is an election year in the US, it is difficult to believe that the Trump administration will not step in by providing fiscal stimulus to the economy soon.

According to the February US jobs report released on Friday, the labour market remained tight and hot in January and February, as the NFP was very strong at 273,000, whilst nominal wage growth rose to 3% YoY. Such a tight labour market, in our view, indicates that the US consumer is very likely to hold up well in the short-term. In addition, collapsing oil prices will further boost households’ purchasing power, which – to some extent – will offset (the expected) industrial weakness.

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