Markets for 2020 and Beyond

  1. All this mega stimulus will remain “in circulation” once things return to normal, and the underlying “normal” is what we had just before the storm hit as of February 2020: low unemployment rates everywhere and economies at or near “full potential”. There was no inflation due to remaining slack and all kinds of other structural forces such as technology, globalization, demographics, and more. But still, we will return rather quickly to normal if things are kept together and all this stimulus money will STILL be “floating around”, plus several truck loads of extra bond supply… all this means we could finally see some inflationary pressure and once capital eventually flocks back to stocks and foreign markets and the Fed stops buying bonds galore, we could also see falling federal bond prices, and that would mean higher interest rates… on the back of sky-high debt loads for governments and corporations… This could become problematic: high debt with low interest rates is fine, but high debt + increasing interest rates = problems!
  2. Keeping with the debt subject, high government debt accumulated due to past debt and historic “stimulus” will eventually bring forth the subject of reigning in deficits and government debt, and that means one of 2 things: increase taxes OR decrease government spending (on what?). Both of these could cause significant social tensions and market jitters.
  3. If this virus shock causes some countries to retreat from “everything global”, we could have trade disputes and disrupted global supply chains, thus causing a negative supply shock which could be at least partially permanent… and that means higher costs and price pressures, hence adding to inflationary pressures and higher interest rates.
  4. If the eternal blame game continues between the USA and China, we could see geopolitical tensions, thus adding to the above-listed risks, in the same directions.
  5. Finally, the “short-but-brutal” recession shock could be too much to digest by the economy and things could fall apart and get ugly, especially if large corporations and financial institutions fail some time in 2020. This could start feedback loops that cause a large one-off shock to turn into a multi-year hell. In that case, the scenario of “going back to normal” will not hold…
Me climbing in Wyoming



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Pascal Bedard

Pascal Bedard

Sharing thoughts on economics, finance, business, trading, and life lessons. Founder of