Weekly Note #1: The start
COVID19. Source: Evidence for Policy Design, Harvard University

Weekly Note #1: The start

I start writing today to push forward a weekly note to cover one interesting topic on economics & finance every week.

Ever since COVID, it has become ever more important to cover aspects of economics & finance that will help explain everyday changes in a much clearer & basic manner than what a business TV channel may do. Purpose is to be brief, crisp and simple while at the same time be informative to the reader.

It will cover one topic every week, being any one of the below (not limited to it):

  1. Major markets or macro news item (e.g. negative crude oil prices, interest rates & their background)
  2. COVID-related economic impacts (e.g. stimulus, US elections)
  3. Human behavior and economics (e.g biases, market irrationality & exuberance)
  4. Introducing Nobel Prize winners & their contribution to economics
  5. Introducing Assets/Alternative Assets (e.g. orange juice rally since start 2020)
  6. And many more!

This note will not provide stock price recommendations (in any case nobody on Wall Street even knows if their target price will be met or not). It will definitely provide a binocular (yes using our two eyes!) view that is different from what you get from your television or daily news.

Now, onto my first topic...

The Wedge: Between Markets & the Economy

Funnily everyone's been wondering why markets were rallying the best in decades while job losses were at record high ever (crazy, right?). The most common reason coming out was that the job losses came out to be less than expected. But there is more than what meets the eye:

  • Revival of economic activity: Murmurs on peak deaths and cases globally; easing of lockdowns and some best-in-class lockdown recoveries by Australia and New Zealand; China coming back on
  • Record stimulus in record time: Even Warren Buffett was of the opinion last week that the Governments have responded so quickly that any investment opportunity that existed is not quite much there anymore (or perhaps he may have referred how lockdown is going to be merciless across the board, to each their own view).
  • Bond/Stock Rotation: Prospect that interest rates may stay low (may even become negative) meaning investors are encouraged to invest in stocks instead rather than put money in a bank or a bond (interest income earning investments)
  • Swoosh (Nike-sign) recovery: Some consensus but still not unanimous. Swoosh is the Nike-sign recovery which means recovery could take some time (means work from homes will stay on for a while, connected to the next point)
  • Tech is king: Tech sector (high weightage in index) is rallying big while crude oil sector's hammered, making tech leading that index rally (thanks to lockdowns)
  • Algos again: Algorithmic trading has been on-going for many years and they respond extremely quickly to positive news such as trillions of dollars in government spending stimulus or money printing

Quite a list there, isn't it? Hold your horses though; markets are not very merciful if you think this is a rally that will continue.

Caveat: Every virus is supposed to have 2 peaks. After the first outbreak, lockdowns placed cause cases to subside. However once those restrictions are eased, a second outbreak leads to a second peak. So it is quite possible this may repeat and a sell-off may be around the corner. But then again, I would refer back to my favorite quote from Mark Twain: "History doesn't repeat itself but it often rhymes."

Signing off until next week.

Any suggestions, comments and queries are welcome.

Muhammed Iftikhar (He/Him/His)

Country Director, Planning & Activation @The Coca-Cola Company | Executive Committee Member American Business Forum | Visionary I Architect | Coach | Catalyst

4 年

Very nice Ahmed Tariq, CFA I feel that COVID has been the “great equalizer” for a lot of industries and firms as well whose stock prices had bren gradually inflating these past 2-3 years. As and when we do manage to transition out of this crisis, we’ll have a fair idea of the degree of correlation that industries have been resilience. As very aprly pointed out, tech remains a winner however pharmas & grocery retailers might emerge as winners as well. Looking forward to the next read. Regards,

回复
Ali A. Malik

Associate Director at Henley & Partners

4 年

Ahmed Tariq, CFA - Excellent piece! Highly informative and insightful yet it was “brief, crisp, and simple!” Many thanks for sharing and look forward to reading the note next week!

Harris Farooq

B2B Marketing Strategist - helping businesses communicate better in the digital world for continuous growth.

4 年

A very comprehensive overview of the current start of affairs, especially looking into the inexplicable rallying. Maybe the size and swiftness of the US relief package has emboldened investors or enough financial motivational gurus have convinced enough people to buy when every one is scared. Tech is reigning supreme but a truer test would be a possible second peak with a lack of a vaccine. How does America-China trade war play in your overall global economy Analysis.

要查看或添加评论,请登录

Ahmed Tariq, CFA的更多文章

  • The Tortoise & The Hare: Lesson on Patience & Long-term Investing

    The Tortoise & The Hare: Lesson on Patience & Long-term Investing

    Aesop's Fables caught my attention first time when I was a kid (Aesop was a Greek storyteller from 560 BC). There was a…

    1 条评论
  • NVIDIA's Hot Until It Is Not

    NVIDIA's Hot Until It Is Not

    Once upon a time I was into computer gaming. The gaming experience (speed and graphics) with a NVIDIA GeForce was epic.

    5 条评论
  • Tom Ripley & Investing

    Tom Ripley & Investing

    Recently Netflix released a show named RIPLEY (Warning: spoilers ahead). A gripping show about a scammer who steals the…

    1 条评论
  • Ignorance is bliss

    Ignorance is bliss

    Ignorance in investing (often) is bliss. I did my first share purchase back in 2009.

    8 条评论
  • Weekly Note #3: Who is leading the Corona Vaccine Race?

    Weekly Note #3: Who is leading the Corona Vaccine Race?

    In 2011, Usain Bolt finished a 100-meter sprint in 9.58 seconds in Berlin.

    3 条评论
  • Weekly Note #2: Will the US Dollar Kingdom survive?

    Weekly Note #2: Will the US Dollar Kingdom survive?

    Back when I was a kid, I enjoyed watching Duck Tales (Scrooge McDuck swimming in his sea of coins) and Ritchie Rich…

    10 条评论
  • All the best Prime Minister Imran Khan

    All the best Prime Minister Imran Khan

    Today, 18th August 2018, marks the day when my leader finally became Prime Minister of Pakistan. It was a tough road of…

    2 条评论
  • Hillary: Good or Bad for Global Economy?

    Hillary: Good or Bad for Global Economy?

    This U.S.

    1 条评论

社区洞察

其他会员也浏览了