The stock fever


Period: 30 October – 6 November 2020

Top news story: The main topic on the news agenda of the week is, of course, the election of the President of the United States, although there is another curious fact – stock markets began to skyrocket even before the election. This is because, regardless of the outcome of the election (which is currently unknown), both sides must, as speculators believe, declare themselves by new injections of money of emission origin.

This is a logical point of view, but it shows in particular that both sides have no realistic and concrete plans to address the economic crisis. What they have is, to a large extent, palliatives, activities, but not programmes that are deployed. The Mikhail Khazin Foundation for Economic Research analyzed these plans (English version of the report will be available in a few days). These plans have been quite different in terms of results over the next two years. We have not found similar estimates, so the comparison in this situation is not yet available and we will proceed on the basis of our estimates.

In any case, if the final wrap-up of the election is delayed, the optimism will go to naught. Looking at speculative markets makes little sense: they are controlled by the same people who put forward Joseph Biden, and in the case of successful Donald Trump lawsuits, the decline of these markets is inevitable. The crux of the matter is whether this is an adjustment or a global recession.


Indonesia’s annual decline in GDP slowed slightly, but nothing more: its first recession in 22 years:

Indonesia GDP Annual Growth Rate

Indonesia is an important country with a large population. But the answer to the question of whether a recession or the beginning of a global depression is happening will be given somewhat later. The monthly increase of factory orders in Germany is the worst in 5 months:

Germany Factory Orders

The annual decline increased slightly, to -1,9% after -1,7%, industrial production increased by 1,6% per month instead of the expected 2,7%. The annual decline declined, but remained sizeable (-7.3%). Manufacturing PMI in October increased slightly everywhere, except for the Russian Federation, where there is a 5-month low:

Russia Manufacturing PMI

In the Russian services sector, the picture is similar:

Russia Services PMI

Growth in services in the US slowed down slightly:

United States ISM Non Manufacturing PMI

In Britain, expansion has significantly slowed down:

United Kingdom Services PMI 

And in the Euro Area, the service PMI went into a slump:

Euro Area Services PMI

The same is true for the eurozone’s construction PMI, which is also sinking deeper into the recession.

Turkey’s PPI has peaked since the summer of 2019 (+18,2% per year), and the CPI is also growing, due to the continuously declining rate of Turkish lira:

Growth in private sector employment in the US (ADP) is the lowest since July:

United States ADP Employment Change 

The number of beneficiaries in the United States under the regular programme is declining, and for emergencies is increasing.

Jobs in October +638 thousand – slightly higher than expected, but the lowest in 6 months; in total, 22 million were lost, only 12 million returned.

France’s budget deficit remains at record highs:

France Government Budget Value

The Euro Area retail market fell by 2,0% per month (5-month record low), resulting in a doubling of annual growth, 2,2% after 4,4%.

Japanese salaries have remained at a negative annual rate, although declining to -0,9%, and the decline in spending has worsened, but mainly because of the high-base effect a year ago:

Japan Household Spending 

The Central Bank of Australia cut the rate by 0,15% to 0,10% and launched a government-bond buy on A$100 billion in the next six months. The Bank of England left the rate unchanged, but extended the government-bond buy by £150 billion. The Central Bank of Russia also did not change the rate.

Summary: PMI figures tell us that the situation is deteriorating. Let’s remind, the PMI (Purchasing Managers’ Index) is the opinion of a large number of industry managers, processed according to complex algorithms, who assess the current situation relative to the previous period. The index ranges from 0 to 100, and if it is above 50, the situation improves, if less, it worsens.
The current situation suggests an increasing level of pessimism, which, in the face of colossal stimulus measures, suggests a very bleak outlook. The pace of development of the crisis varies from country to country, with some of the recovery already over, still under way (albeit at a reduced pace). However, the overall trend is becoming clearer, especially given the natural optimism of entrepreneurs.
The start of the «second wave» of the COVID-19 epidemic and the elections in the United States do not raise optimism. In this situation, I am not in a position to make any predictions, but understanding the role of the various elite groups in terms of their influence on economic policy (see «Reminiscences of the future» in English translation) suggests that the outcome of the pre-election struggle will be crucial to the future of the world economy.


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