Runways

I’ve been thinking a lot about runways lately, probably because we’ve been inundated with images and descriptions thereof: namely  empty actual airport runways and the runways companies and countries are going to need to exit this latest exogenous shock.  Just as with their aeronautical equivalent, companies and countries are vigorously trying to find the lift and the length of ground necessary to safely exit this pandemic without a violent ending. The problem is that the lift (stimulus both fiscal and monetary) is being applied to an aircraft weighed down by a multitude of existing mechanical problems. While we have no reason to believe that the aircraft won’t get off the ground, the length and success of the ensuing flight is not assured, something you would never know if you look at the equity markets YTD. As we have written about before, the efficacy of Monetary Policy globally was on the wane going into this crisis, and certainly there is nothing to make us believe that Central Banks, even in concert with relatively unrestrained fiscal policy, will provide nothing more than a brief bounce in growth. We also have no doubt that anything less than a V shaped recovery will quickly be met with a multitude of Central Bank countermeasures, none of which will be effective. Fade the V, Buy Stuff.