Many investors are abandoning their calls for a retest of the March 23rd low.  Global equities are soaring higher as early signs suggest curve flattening is happening in Europe and that US could be a couple weeks behind them.  The massive easing actions by the world’s largest central banks may have bought risky assets enough time for traders to become somewhat optimistic on the virus front.

The rally in equities will likely be short-lived as investors will soon have to become skeptical of the great recovery and focus on the financial stress that will happen after several key parts of the economy will not come back to life for many months.  Travel, entertainment, and physical retail (excluding food and drug) will not see any normalcy until much later in the year.  I don’t see people going to a Broadway show, baseball game or trying to book a vacation this summer.

In the short-term, S&P 500 futures may extend their gains if New York shows further signs the crisis is easing.  It is still way too early to say the virus is plateauing, so the next week will be critical for financial capital of the world.  If the pace of new cases and coronavirus deaths slows down, risk assets could continue to climb another 10% higher.  Despite mounting optimism regarding Covid-19, damage to the labor market and a delayed economic recovery will put the pressure back on stocks.  US stocks could see this current rebound be the middle part of a W-bottom pattern.


Oil prices softened after the emergency OPEC + virtual meeting got pushed back from Monday to Thursday, as more time was needed for negotiations. A broad strokes deal or continued negotiations will likely become the base case, but for now, energy traders should prepare for lots of posturing from the Russians.

The front end of the crude curve will continue to be downright despondent.  Even if the US, Canada, Norway and others signal they will cut production alongside OPEC +, it is unlikely that they can make up for all the demand devastation that remains firmly in place.  Global storage tanks will continue to get filled and once storage capacity is reached, oil prices could enter freefall.  OPEC + might have a couple months before global storage capacity is reached, so production cuts will have to happen no matter what.

Oil could see further selling pressure leading up to the Thursday’s meeting on Russian posturing.  Russia is consistently wanting US participation and there is no structure in place to regulate US output on a national level.

WTI crude should settle around the low-mid-$20s as energy traders fade the risky asset rebound that stemmed from improving virus data over the weekend from Europe and New York City.


After a few failed attempts, gold could have the all-clear sign to rally above the psychological $1700 level. Gold has managed to withstand a massive dollar rally, short-lived margin call pressures (scramble for cash) and on optimism logistical disruptions(shortages in delivery future contracts) should see some relief.   The march to uncharted territory will be tough, but very possible for gold.  Fiscal and monetary stimulus will provide a nice backdrop for gold, but safe-haven demand will be high due to upcoming financial stress that will persist over the coming months as the US economy enters a very dangerous place.  The US labor market will see permanent damage and it will be nearly impossible to quickly reopen the economy.



Mexico President Lopez Obrador’s fiscal plan does not get the job done.  The plan falls short of expectations and will likely provide further pressure on the Mexican peso.  AMLO will announce an energy infrastructure plan next week, try to create 2 million jobs, and cut salaries for top officials.  If there was a time to increase public debt, this was it.  When emerging markets see a return of heavy selling pressure, Mexican assets will underperform.

The Mexican peso is stronger mostly on the broader market rally as the virus numbers show some signs of easing.  This peso rally is likely to be short-lived as emerging markets are likely to see continued pressure on oil uncertainty and unbalanced stimulus programs when compared to Europe and the US.


The Colombia peso rally might not last as the strong break of the psychological 4,000 was mainly due to the broader market rally.  In the short-term, the peso should still remain vulnerable on oil price uncertainty, further sovereign downgrade risks, and lack of confidence the government will clean up the fiscal situation.


In the emerging market space, it is hard to get excited about Brazil.  Any strength that the Brazilian real displays will be questioned as the Ministry considers relaxed isolation after Easter, the central bank has been too conservative in their easing response and tighter restrictions on banks’ use of dividends and buybacks.  Brazil will benefit from the global risk-on rally that stemmed from positive signs the Covid-19 curve is flattening in Europe and that the US might only be a couple weeks behind them.

By Ed Moya