The economy, as predicted by many, is experiencing a V’ish shaped recovery, which was confirmed by recent employment data and earnings reports. I would expect this to continue for the rest of the year. The tech heavy NASDAQ is on FIRE due to people leveraging technology to work remotely. In spite of this the rate of increase in the NASDAQ shows signs of slowing as the index continues to new highs. My indicators, however, show no signs of a major pullback soon. The SP500 is finally up for the year.
So what does the future hold? US Presidential Election …. Cold War with China. Regardless of who wins the US presidential election a US-China cold war is coming. This isn’t necessarily a bad thing and unlike the US-Soviet Union Cold War, which ended with the collapse and end of the Soviet Union, a US-China cold war could end with the decoupling of the two economies, which could be beneficial for both. A decoupled China could achieve economic prosperity from growth in the domestic economy and a decoupled US could achieve more economic growth from import substitution and money saved from policing the South China Sea. So both sides win! Though post election and pandemic “end”, be prepared for the return of trade related market volatility.
The future president will set the tone for this war. If there is a Trump win expect an iron fist holding a spiked club approach, and if there is a Biden win expect a velvet glove holding a baseball bat approach. In spite of tough talk neither Trump nor Biden will be willing to use overt force since Americans are beginning to grow tired of wars and more importantly too many people in the US and China would lose too much money if there was an actual shooting war. The US China cold war will be mainly economic and cyber, and both sides will eventually realize that they are better off without the other.
So who’s going to win in November? Well that is another post.
Quant For The Masses 