It is impossible to gaze into a macro crystal ball without being forced to swallow crushed glass at the best of times. This is definitely not the best of times but I will take the risk of choking on shattered glass anyway and take you into the netherworld of my nervous system.
One, the US economic supertanker finally stalls as the Chicago PMI and consumer confidence rolls over on epidemic fears. The Powell Fed panics when the yield on US Treasury bond plunges to 1.4% and slashes the Fed Funds rate at the March FOMC by 50 basis points to 0.75%. US money center bank and insurer shares decline 25% in 2020.
Two, China’s economy and society is devastated by the Wuhan coronavirus epidemic. Commodities markets, from Dr. Copper to soybeans to aluminum, go into free fall, as do emerging markets dependent on commodities exports to the Dragon Empire. South Korea, Taiwan and Japan stock markets are hardest hit by the loss of exports to China. Chinese GDP growth falls to 4% in 2020. The Wuhan coronavirus is an unmitigated disaster for crude oil markets since China is the world’s second largest importer of petroleum. A surge in US inventories adds to the global oil glut and OPEC is unable to increase its output cut pact from 1.7 MBD to 2.5 MBD. Despite US sanctions on Venezuela and Iran, oil prices go into a free fall as global distillates demand crumbles. In 2002-3, black gold fell 30% when the SARS virus hit Hong Kong and China. Brent crude falls to $35 by autumn 2020 as Saudi Arabia’s role as OPEC swing producer is negated by the surge in US shale oil output to 14 MBD.
Three, Bernie Sanders defeats Joe Biden to win the nomination of the Democratic Party as young Gen Z voters embrace his anti-plutocrat, pro-climate change and anti-income inequality message. Despite a desperate payroll tax cut by Trump in summer 2020, he defeats the Republican nominee to become the 46th President of the United States in November 2020. The Republican Senate’s failure to allow witnesses at Trump’s impeachment trial is the biggest cover up in American history since Watergate – and this cost the GOP the 2020 Presidential election.
