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.