Next Week News

A number of market commentators have noted the historic nature of the recent market drop, which has taken us over 10% lower in major stock indexes in just a few days. My work as a performance psychologist for hedge funds and trading firms has never been busier. The uncertainty and potential economic and market risks associated with a coronavirus outbreak have investors running for the relative safety of investment grade fixed income and away from the very growth stocks that were recent market darlings. How can psychology help us at such periods of risk and uncertainty?

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The government of Hong Kong has decided to enhance its regulatory oversight of digital assets by boosting its Financial Action Task Force (FATF)-recommended anti-money laundering (AML) and counter-terrorist financing (CTF) compliances.
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Global growth this year would be much lower than 2019 level as the coronavirus, or COVID-19, spreads to several countries hurting economic activity, International Monetary Fund Managing Director Kristalina Georgieva said Wednesday.

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Chancellor Rishi Sunak unveiled a comprehensive stimulus package totaling GBP 30 billion [$39 billion] on Wednesday to support the UK economy as the coronavirus, or Covid-19, keeps spreading hurting people and businesses.

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Sunday evening started with a bang in the U. S. with the Federal Reserve’s Fed Funds target now set at 0% to 0.25%.

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According to the US Treasury Secretary Steven Mnuchin new regulations for cryptocurrencies will be put in place through the Financial Crimes Enforcement Network which itself is subordinated to the Treasury Department.
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“The Fed has moved from being the lender of last resort for the banking system to being the lender of last resort for the entire economy."

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Minutes from the Federal Reserve's emergency monetary policy meetings in March showed a few participants preferred a smaller interest rate cut to slashing rates by a full percentage point at the March 15th meeting.

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Total World GDP Output

The total world GDP output was approximately $190 trillion. An estimated 15% to 20% global GDP contraction as a result of the Covid-19 virus event would shave $28.5 to $38.0 trillion right off the top of the 2020 global economic output. Should the global shutdown last through the end of May 2020 (or beyond in some form), we believe the contraction in global GDP could become even more severe.

The complicated issues that arise from this global contraction in GDP also bleed over into supply-side economics. As the world attempts to “shelter in place” to avoid spreading the virus and risking more lives, demand collapses. Once demand collapses enough (resulting in price level collapses as we’ve seen in Oil) the result in production/supply issues becomes even more complicated. Unlike Eggs or Milk, one simply can’t bury or destroy other types of supply. The destruction of certain industries, resources, and capabilities will become very real over time as a result of any extended contraction event. The longer-term results of this type of event are sometimes called “stagflation” – where price levels rise as income and economic output stay moderately flat.

These longer-term economic expectations are key to understanding how the recovery process will create opportunities for skilled traders and investors.

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Facing growing regulatory hurdles, Libra, the controversial Facebook crypto currency project, has been redesigned to include multiple versions of the proposed stable coin, each backed by a single fiat currency like the Euro or the U.S. dollar.

In response to the regulatory concerns that Libra could undermine the control of the central banks over the monetary system, the Libra Association, the coalition of companies backing the project, made other changes as well, and has started negotiations with regulatory authorities in Switzerland for a payments license.

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