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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This was the week when the “light at the end of the tunnel” metaphor was superseded by the “race against time.”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