Senators closing in on a deal
On CNN a short time ago, US House Majority leader Nancy Pelosi had this to say: "If McConnell says we are on five yard line and Senator Schumer says we're on the two-yard line, we're in the end zone."
She thinks it's a done deal. There are other positive indications as well and both sides are facing unprecedented pressure.
The reality is that a deal is going to get done. It might blow up first but it's going to get done at some point, so you really have to price it in.
The thing is, nothing is really 'priced in' right now. You can't price in a pandemic and Fed programs that have never existed before. You can't price in a complete shutdown of India and a 20% decline in crude oil demand globally. You can't price in +$600 trillion in global OTC derivatives and how they might be unwound.
Even simply focusing on the US is non-sense. It accounts for about 15% of global GDP (depending on USD value). Even if $2.5 trillion in stimulus cushions the blow in America, the vast majority of the other 85% of the global economy is slowing down.
The market is trading on emotion and momentum. Cameron Crise writes today about the massive rebalancing that's due in bonds/stocks. He notes that in 9 of the 10 largest rebalancings, stocks rose in the final week of the month, including Oct 2008.
That might be as good as it gets in terms of analysis. On the headline front, the US numbers are sure to rise in the next few days. It's nearly a mathematical certainty that New York cases will pass Wuhan; and probably before month end.
