According to Steen Jakobsen, Chief Investment Officer in Saxo Bank, the pandemic triggered three key macroeconomic impulses –  global demand shock, global supply shock and the war for oil, which pushed prices to long-term minima.

“For 30 years of work in this profession, I have not yet seen that the economy was given three blows at once,” Jakobsen wrote.

He added that the behavior of the markets this year is completely unprecedented and shows a lack of liquidity. The triple blow to the global economy almost guarantees that the 2020 marketing year is already lost and policymakers should take all necessary measures to tackle a real global recession.

“The political response has traditionally been associated with lowering the price of money. However, as Fed rates reached zero before the start of Q2, all of the world's largest central banks were at the same level (and some even lower, given the negative interest rate policy). The potential of monetary policy is limited at best, and at worst - directly detrimental to the ability of economies to react - because the low speed of money circulation means lower inflation, and thus lower net demand for loans,” analyst warned.

In his opinion, only the politicians can take over from the losing central banks and increase spending without restrictions on debt issuance, which means real money printing.

“In economics, we have Say's right: to assume that supply creates its own demand. And this will be a good solution because bankruptcy through deflation of debt and implosion of loans is not an option. Governments will create money in a way that goes beyond any balance sheet or off-balance sheet constraints. The 2009-2020 bull market, the longest in history, has just died of a coronavirus. Meanwhile, our economic and political structures are the weakest since the 1930s,” Jakobsen said.

(Steen Jakobsen - Saxo Bank)