• Ashok Dhillon

The Year 2020 Has Ended – Hopes for A Better 2021 (#127)

Updated: Jan 4

There are few in the World who are not relived to see the year 2020 in the rear-view mirror, as it was undoubtedly, for most, a ‘annus horribilis’ (to borrow the phrase from Queen Elizabeth).

It was a year wracked with international political, economic, and personal health crises worldwide. The year 2020 created more anxiety and suffering globally, than perhaps some the years of the last great world wars.

The biggest culprit for such turmoil was of course the global Corona Virus pandemic; and it can be argued the second greatest cause for global turmoil was the notoriety seeking, dissension causing, national and international norms busting ‘US President horribilis’, Donald J. Trump.

On November 3rd, 2020, most of America and the World were happy and relieved to see him ousted as the US President, and a sane person, Joe Biden, being elected as the next President. In history however, the year 2020 will of course be most remembered for the global pandemic and the unprecedented upheaval it caused throughout the world. The speed of its global spread and its subsequent unstop-ability, and its devastating impact on global economies, was breathtaking in scope.

Even as the year comes to an end, after combined global efforts to stem the spread of new infections, and the rising hospitalizations and deaths, the pandemic of 2020 is entering the New Year 2021, possibly at its worst, with rising new infection and death rates. Globally, over 82 Million people are infected, and over 1.8 Million deaths have been attributed to COVID-19 virus infections… And these numbers are still climbing at a distressing rate.

In the US alone (consistently the leading country in the number of infections and deaths in the world), over 20 Million Americans are now infected, with that number expected to continuously climb rapidly over the coming months, with the current death toll at almost 350,000, which is continuing to climb rapidly, as so many Americans continue to flaunt the precautions needed to bring the infections rate down.

But hope is rising as we enter the New Year 2021, because of the development of multiple, incredibly effective vaccines for the COVID-19 viruses (as per the claims of the manufactures) being rolled out and distributed increasingly around the world, albeit seemingly at glacial pace at the ground level. And, let’s not discount the great positive of having a new US President in Democrat Joe Biden, a famed conciliator, who will certainly bring greater stability and cooperation between countries to fight the pandemic, and try to boost the faltering economies with greater support to small businesses, and the ordinary Americans, and not just Trillions going to rich Wall Street speculators (individuals and institutions) and big corporations, as is the way with the Trump and the Republicans.

In spite of hopeful developments like the vaccines, and the election of a ‘normal and sane’ US President, there are great uncertainties and risks facing the global community in 2021.

The ‘Great Pandemic of 2020’, which is going to be a ‘thing’ going forward, wrought havoc and in record time devastated the economies of the world.

The general response to the lightening-speed unprecedented damage to the economies, by governments and their Central Banks around the world was the unleashing of hereto unheard-of sums of monetary and fiscal stimuluses that have temporarily sought to ease some of the economic damage and pain.

These mass stimulus efforts propped up rapidly unmoored and free-falling individuals and businesses, as international, and in places internal borders closed shut, and travel and economic transactions were severely curtailed in a global effort to try and stem the plague-like spread of the virus around the world.

A lot of these measures are still in place today, and in the face of dangerously high resurgences of new infections into the winter months, have in fact been further tightened, with the predictable highly negative impact on the livelihood of individuals, families, and on businesses and economies in general. These greater restrictions are going to warrant even greater amounts and possibly more rounds of stimuluses.

The majority of Central Banks and their governments are responding to this continued economic threat by further extending and expanding the monetary and fiscal relief and rescue packages. And therein lie the growing risks to economies and the high-flying stock markets, and various asset prices. For, as the monetary and fiscal stimulus continue to expand, the ‘stimulus fueled’ global and national debts are climbing to astronomical levels, bringing with them the inherent risks of exceptional debt burdens to national and global financial systems, while continuing to pump potentially dangerous speculative bubbles in various asset markets.

The steady and unprecedented stimulus monies are unleashing unrestrained speculation in the certain stock markets, bond markets, real estate markets, and in perceived hedges such as crypto-currencies.

The speculative activity is also being driven by the near-zero, zero, and in some countries negative interest rates, as desperate ‘yield’ deprived investors and institutions are being herded into risky equities, bonds, real estate, metals and the crypto-markets, to find ‘adequate returns’ in ‘zero interest rates’ environments. And since according to the major Central Bankers the ‘zero or near zero interest rates’ are practically locked-in for the next few years, as far as they are concerned, the ‘returns’ seeking investments are going to continue to pour into the riskier assets.

However, if the investor sentiment in the Markets were to turn negative for any reason, then the potential for extremely damaging price reversals in the highest priced assets become increasingly greater in short to medium term. In the longer term, a damaging reversal in investor sentiment is practically inevitable, with the corresponding reversal in lofty valuations in asset prices, which will further damage economies.

To add to the global economic uncertainty, Britain finally managed to sever its decades long membership in the EU with a hard fought but reportedly ‘thin’ Brexit deal. What exactly is going to be the fallout from the disruptive Brexit on the British and the EU economies (?), is still to be seen in the coming months and years.

For at least the first half of the New Year 2021, the COVID-19 virus and its emerging mutations, and the effects of the various vaccines that are starting to be administered, are going to be the dominant determinants of the tone of the rest of the year, as to greater positive or negative outcomes globally.

If the stresses on the economies increase from the continuing fallout of the long-raging pandemic, and investor sentiments turns pessimistic, or worse yet, panicky, then we may see the reversal of the asset prices as stock markets correct, and the current speculative and investing euphoria turns to doom & gloom, and the resultant flight of monies flow into perceived safer investments like cash, gold, silver and such.

In these early days of the New Year, and with Joe Biden not yet in power, and with the pandemic still mostly out-of-control, it is only safe to predict uncertainty and volatility going into 2021, with an underlying sense of hope, and general expectations of better times starting sometime later this year.

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