U.S. Stimulus Stalls, Oil Remains Vulnerable

 | Mar 23, 2020 08:22AM ET

h3 Just Another Manic Monday

It’s frightening how normal it feels to wake up on Monday morning and see markets flashing red and down another 5%.

That is the world we live in now though, with the number of confirmed cases and deaths spiking around the world and the worst still yet to come. Governments and central banks, to their credit, are not taking the crisis lightly and have announced enormous stimulus packages to protect households and businesses, but even that hasn’t been enough.

As long as we continue to see this kind of exponential growth around the world, the case for a stock market bounce is weak. Even stability will be hard to come by. If investors hate uncertainty, they’ll despite this. The v-shaped recovery is a hope of the past, everyone is now just hoping that the temporary unemployment spike doesn’t become more permanent or we have a real problem on our hands.

The failure of the US Congress to pass its stimulus package doesn’t help matters. It will not have solved the problem but it may to a lot to alleviate the pain for households and businesses in the US, which in turn offers some comfort to markets. I think it’s only a matter of time until a package is passed, the delay has been disappointing none-the-less.

With banks now forecasting hugely pessimistic growth estimates for the second quarter, as much as 30% on an annualized basis, bold and swift action is needed. Congress needs to get its act together.

h3 Oil remains vulnerable/h3

Oil suffered one of its worst weeks ever, last week, and it could be in for another rough ride. Brent crude has already tested last week’s lows before running into some support. Given the scale of the losses endured already, you have to question just how much lower it can feasibly go but, as is the case with stocks, the outlook is so unclear that beyond price alone, there isn’t much of a bullish case.

Brent Daily Chart