Weekly Market Digest
December 14 to December 18, 2020
Don Curren
December 18, 2020
This was the week when the “light at the end of the tunnel” metaphor was superseded by the “race against time.”
Two races, actually.
In one, logistics crews hustled super-cooled shipments of the Pfizer/BioNTech COVID-19 vaccine to distribution points around the world where they were promptly used to vaccinate some very deserving people, including heroic personal support workers and other health-care personnel in Canada and the US and vulnerable seniors in the UK.
That was the inspiring race against time.
The other was headed in precisely the opposite direction: it was the race by the coronavirus to seemingly do as much damage as possible before the vaccines are widely distributed, aided and abetted by human beings ignoring the directives issued by health authorities and governments.
The results were evident in the relentless climb in coronavirus cases and deaths around the world. As of Friday, the New York Times coronavirus tracker reported 75 million cases around the world, a 7% increase from two weeks before, and 1.6 million deaths, an 8% increase.
The magnitude of the economic risks emanating from the coronavirus, even now as vaccines are being disseminated around the world, was recognized by the US Federal Reserve in its statement after its last policy-setting meeting of the year on Wednesday.
“The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year,” the Fed said. “The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
The two opposing races against time reflect humanity’s curiously “schizophrenic” reaction to the worst pandemic in 100 years – and arguably the most serious global crisis since World War II.
Students of societal collapse such as Joseph Tainter and Thomas Homer-Dixon argue that it’s often the complexity of the systems that humans devise to solve their problems that makes societies vulnerable to collapse.
They can become so complex and so fragile that they’re rendered “brittle” – they break, rather than bend, when confronted with a serious exogenous threat. Their complexity and interconnectedness make them extremely powerful, but also, in many cases, extremely vulnerable.
Of course, we’re all familiar with times when complex systems did collapse due to a relatively small problem: the blackout of 2003, for instance, when a software bug in the alarm system at the control room of a small power company based in Akron, Ohio, ultimately cascaded into a power outage that affected 55 million people in parts of Canada and the US.
In the pandemic, the complex systems that underpin our advanced societies didn’t collapse, at least not in any pervasive or disastrous way.
Our power supplies were generally reliable, and our communications networks not only remained intact, they actually handled markedly increased traffic as people worked from home – and streamed enormous amounts of programming from Netflix.
Our financial systems all proved surprisingly resilient – particularly our monetary and financial infrastructures. After a few early hiccups, when funding markets, for instance, threatened to seize up, rapid action by central bankers ensured they didn’t. Governments also acted swiftly to ensure money flowed to workers whose incomes were disrupted.
It could be argued that, overall, human beings weren’t failed by their systems in 2020. Instead, it was the other way around – humans failed their systems.
Provided with guidance about social distancing, isolation and facial masks – admittedly after some fits and starts in the early days – many people acted appropriately. Many others didn’t. The SARS-CoV-2 virus was given far too many opportunities to spread, and a pandemic that should have been contained raged out of control in far too many places.
It was partly a failure of leadership. Not all leaders presented their publics with an accurate account of the risks facing them and the actions needed to contain them.
It was also a failure of “followership.” Many people were who given the benefit of accurate information and useful guidance simply chose to ignore them, with often disastrous results.
The race will ultimately be won, of course, by the vaccines and cutting edge of science and health care they symbolize, and the transportation and logistics systems that underpin the vaccination.
So, it’s possible to look forward to the imminent New Year with a degree of hope.
And, if we look back at 2020 with regrets, we can also resolve to learn its lessons, so we’re better prepared for the next time around.
With that in mind, Best Wishes for the Holiday Season and for a Safe, Healthy and Prosperous 2021 – and Thanks for your readership and support in 2020.
NOTE: There will be no Weekly Digests on December 25 and January 1 due to the Christmas and New Year’s holidays. We will resume publication in the New Year on January 8.
Suggested Reading | Cambridge Market Analysis
■ Canadian Retail Sales Data Highlight Consumer Resilience read article
■ Weak US Jobless Claims Data Point to Possible Tragedy in Recovery’s Final Act read article
■ Fed Powells at the Moon read article
■ Canada’s Consumer Inflation Accelerates in November While US Retail Sales Plunge read article
Suggested Reading | Counterparties
■ WSJ: Suspected Russian Hack Said to Have Gone Undetected for Months read article
■ LSE Business Review: New paradigms explore ‘systems-oriented’ ways of managing risk read article
■ Federal Reserve: Summary of Economic Projections read article
■ WSJ: The Best Year Ever’: 2020 Was Surprisingly Good to Small Banks read article
■ Statistics Canada: Caring for their Children: Impacts of COVID-19 on Parents read article
■ IMF: Reserve Currencies in an Evolving International Monetary System read article
■ New Yorker: Can You Really Buy Bob Dylan’s Songs? read article
■ Project Syndicate: Avoiding America’s Vicious COVID Cycle read article
■ FT Opinion: Why it is foolish to bet on a dollar crash read article
■ NYT: How the Economy Is Actually Doing, in 9 Charts read article
Calendar for the Weeks Ahead
Monday, December 21
■ EUR – Flash Consumer Confidence
Tuesday, December 22
■ GBP – Gross Domestic Product (Final)
■ USD – Gross Domestic Product (Final)
Wednesday, December 23
■ CAD – Monthly Gross Domestic Product
■ USD – Personal Consumption Expenditure Price Index
Thursday, December 24
■ USD – Jobless Claims
■ USD – Durable Goods Orders
■ JPY –Retail Sales
Friday, December 25
■ Christmas Day
Monday, December 28
■ USD – Conference Board Consumer Confidence Index
Wednesday, December 30
■ USD – Goods Trade Balance
Thursday, December 31
■ USD – Initial Jobless Claims
2021
Friday, January 1
■ New Year’s Day
Monday, January 4
■ USD – ISM Manufacturing PMI
Wednesday, January 6
■ USD – ISM Services PMI
■ USD – FOMC Meeting Minutes
■ AUD – Trade Balance
Thursday, January 7
■ USD – Initial Jobless Claims
■ USD – Trade Balance
■ CAD – Merchandise Trade Balance
Friday, January 8
■ USD – Nonfarm Payrolls
■ CAD – Labor Force Survey
Don Curren
Market Strategist and Content Editor
dcurren@cambridgefx.com
@dbcurren
-
This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.
“Cambridge Global Payments” is a trade name, which in this document refers specifically to one or more of these legal entities: Cambridge Mercantile Corp., Cambridge Mercantile Corp. (U.S.A.), Cambridge Mercantile Corp. (Nevada), Cambridge Mercantile (Australia) Pty. Ltd.
Cambridge Global Payments (“Cambridge”) provides this document as general market information subject to: Cambridge’s copyright, and all contract terms in place, if any, between you and the Cambridge entity you have contracted with. This document is based on sources Cambridge considers reliable, but without independent verification. Cambridge makes no guarantee of its accuracy or completeness. Cambridge is not responsible for any errors in or related to the document, or for damages arising out of any person’s reliance upon this information. All charts or graphs are from publicly available sources or proprietary data. The information in this document is subject to sudden change without notice.
Cambridge may sell to you and/or buy from you foreign exchange instruments (including spot and/or derivative transactions; both kinds are here called “FXI”s) covered by Cambridge on a principal basis.
This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.
Before acting on this document, you must consider the appropriateness of the information, based on your objectives, needs and finances. For advice, you must contact someone independent of Cambridge.
Certain FXIs mentioned in this document may be ineligible for sale in some locations, and/or unsuitable for you. Contact your Cambridge representative for further information regarding product availability/suitability before you enter into any FXI contract.
FXIs are volatile and may cause losses. Past performance of a FXI product cannot be relied on to determine future performance.
This document is intended only for persons in Canada, the US, and Australia. This document is not intended for persons in the UK or elsewhere in the EEA. In Australia, this publication has been distributed by Cambridge Mercantile (Australia) Pty. Ltd. (ABN 85 126 642 448, AFSL 351278); for the general information of its customers (as defined in the Corporations Act 2001). This entity makes no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law.
Fees may be earned by Cambridge (and its agents) in respect of any business transacted with Cambridge.
The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact the applicable Cambridge if you wish to use Cambridge services to enter a transaction involving any instrument mentioned in this document.
© Copyright 2018, Cambridge Mercantile Corp., ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Cambridge Mercantile Corp. See www.cambridgefx.com for contact details.
Subscribe
