Fear of lockdowns, US GDP and its future, oil perspectives

The pandemic situation in the world and individual countries continues to deteriorate. The result of this was the emergence of a new phobia in the financial markets - fear of lockdowns. The likelihood that countries will begin to close again is high enough. At least if you look at the dynamics of new cases in the United States, where they exceeded the mark of 40K per day, which is a new historical maximum.

Amid such dynamics, the University of Washington in Seattle recounted the possible number of deaths in the United States by October. Now it is 180,000, which is almost 50% worse than the previous estimate of 122,000.

If the US economy will be closed again, neither the Fed nor the new stimulus from the government will help the US stock market - sell off will be inevitable. But even in the current reality (without a second lockdown) everything does not look very good. Recent US unemployment figures show that around 20 million people continue to receive unemployment benefits. At the same time, over the week the number of new applications again turned out to be near 1.5 million.

Yesterday, the final estimates were published on US GDP growth in the first quarter: a decrease of 5%. Recall that this is only the beginning of the problems for US GDP, and not their peak. Most experts believe that the fall in US GDP will be measured in double digits. Leading analysts estimate the rate of decline at 30-40%. Which, of course, is absolutely unthinkable, but in a month, it can become a reality. The growth of the stock market amid such data is beyond the scope of our imagination.

So, we continue to remind about our recommendation to sell on the US stock market, and other countries too.

In general, the threat of repeated lockdowns carries risks for a number of assets, including oil. The validity period of OPEC + in the current volume is gradually coming to an end (recall, it is valid until the end of July, May and June have already passed), that is, a couple of million barrels per day of additional oil will appear in the market in a month. But the lockdowns will provoke another sharp drop in oil demand. This will inevitably lead to a sharp drop in oil prices, as the oil storage facilities are still full (for three consecutive weeks, US oil stocks are growing). So in the current environment, we are probably inclined to sell oil.