China and statistics vs IMF and Goldman: positive vs negative

15 de abr. de 2020

Investors are definitely yearning for risk and buys; as a result their perception of reality has become one-sided positive. And they have reasons for that. Let's go over the main positive news.

The statistics on the epidemic both in the world as a whole and in the USA in particular, and especially in Europe, generate more and more optimism: the number of new cases and confirmed deaths continues to decline. This suggests that the worst is over. Accordingly, the issues of unlocking economies and returning to normal functioning are becoming more and more active on the agenda. Trump states that he has the authority to open the economy. Plus a number of US governors have agreed on common efforts to reopen.

Currently no specific dates have been given yet. Quite the contrary, the UK plans to extend the lockdown (do not forget about our recommendation to buy EURGBP ), and France has already extended it until May 11.

Another reason for optimism was data from China. In March, Chinese exports (in dollars) fell by 6.6%, while imports - by 0.9%. Analysts expected a decrease of 15% and 8%, respectively. So we can say that in the current situation the data are simply excellent. China is signaling to the rest of the world that it is possible to get off with a slight fright.

Still, we do not consider the example of China to be very revealing and directly applicable to other countries, primarily the Eurozone and the United States. Just look at the statistics for the epidemic to understand how strong the difference is in the situations.

In order to return to the ground, we suggest to explore the latest IMF report on the current situation in the world and prospects for 2020. According to IMF forecasts, as a result of a pandemic, the global economy will sharply decline by 3% in 2020, which is much worse than during the financial crisis of 2008-2009. The IMF expects that by the end of 2020, the GDP of developed countries will decline by 6.1%, and that of developing ones by 1%.

Some of the most frightening quotes from the report: “the world economy has been hit hard since the 1930s,” “most countries will be thrown back even after recovery.”

And some more cold showers from Goldman Sachs analysts. According to their calculations, in the second quarter of this year, developed economies on average will shrink by 35% (!)compared with the first quarter. This is 4 (!) times more than the previous record set in 2008 during the global financial crisis.

That is why we do not share the optimism prevailing in the financial markets, and continue to recommend sales in the stock markets.

We draw attention to simply excellent prices to sell the Russian ruble , the strengthening of which in the light of the last OPEC + agreement and current oil prices seems more than premature and even abnormal.