One week ago, when JPMorgan's Marko Kolanovic laid out a very controversial - to those in the anti-Trump camp - position, that the lockdowns resulting from the coronavirus may have caused more deaths than covid-19 itself, it sparked outrage among liberal circles, and nowhere more so than on CNBC where the JPM quant was literally yelled at by Andrew Ross Sorkin (the former NYT writer must be going through a very stressful period judging by his recent outbursts) for daring to suggest that ending the economy-crippling lockdown - with a presidential election just 6 months away - is the best option.
What is ironic is that in that same note, Kolanovic took a veiled shot at Trump supporters and/or conservatives who actually share Kolanovic's view, when he wrote that "on the other side of the political spectrum, demagogues and radicals across the world will be tempted to use COVID-19 to blame immigrants, people of different race, or use the pandemic as a pretext to intensify geopolitical tensions." How amusing then, that none other than one of the young and respected acolytes of liberal media, Andrew Ross Sorkin, ended up screaming at Kolanovic (which judging by the CNBC segment, the JPM quant certainly failed to predict, but then again his crystal ball in the past years has been cloudy on more than one occasion).
In any case, Kolanovic - who as a reminder expects the S&P to hit new all time highs in 2021 - left off his otherwise optimistic note warning cautioning about the emerging political risks, i.e., the politicization of the COVID-19 epidemic, and writing that "blaming the pandemic on an ethnic group or country can provide a convenient excuse for various failings at home, or may provide pretext to push a geopolitical or protectionist agenda. This is perhaps even more dangerous than using the pandemic to further domestic political outcomes."
Well, fast forward to today, when in yet another note, the JPM quant, perhaps traumtized by his CNBC experience, is decidedly more bearish, and instead of focusing on the reopening of the economy as the base case for his traditionally cheerful outlook, Kolanovic says that he is "dialing down our positive outlook on equities" for two reasons: concerns there won't be a full reopening of the economy for political reasons, with the same reasons resulting in "geopolitical tensions that could cripple the recovery of global trade."
The key excerpt from his note is below:
In our last note we highlighted emerging political risks, namely politicization of the COVID-19 epidemic. This could on one side lead to paralysis and delays in reopening the US economy and on the other side to geopolitical tensions that could cripple the recovery of global trade. Reopening the US economy is a complex process that is influenced not just by the virus but also by messages sent by the media and politicians.
We wonder how much of this criticism is geared at Trump and how much at Sorkin.
These can have an impact on consumer behavior. Reopening only half of the economy will not be sufficient to support our current forecast for all-time highs in 2021. On the other side, a complete breakdown of supply chains and international trade, primarily between the two largest economies (US and China), would justify equities trading drastically lower. As the market staged a substantial rally (nearly ~40%) since our out-of consensus bullish call, we are dialing down our positive outlook on equities and would like to see these political risks show signs of normalization.
Ultimately, Kolanovic says that he believes the "abovementioned politicizations of COVID-19 will backfire and will be abandoned, but some self-inflicted damage could perhaps happen first" and while the JPM quant is probably right, but it won't happen before the elections, and should Trump win the re-election on a anti-China platform, it won't happen after either.