The hope for support in oil market prices as a result of the supply deal last week hit a significant bump over the last few days. With trading reopened for the week, oil prices for May delivery have plunged 40% today alone to around $11/barrel. This is a result not only of excess supply but the collapse in demand as a result of the pandemic. The challenge presented by the near-term prices is where to put the oil until demand rebounds. With storage facilities filling up quickly, it is not inconceivable to see negative oil prices in the next few months.
Global economic data continues to show the severity of the worldwide economic decline as a result of the pandemic. The economic data over the next month will continue to be unprecedented despite the early efforts to reopen the economy. Rapid and large fiscal stimulus continues to offset the economic declines. I expect to see additional stimulus, with a replenishment of small business loans in the U.S. as well as a phase 4 stimulus package focused on municipalities and infrastructure to pick up momentum.
Equity markets continue to be supported by the stimulus and optimism for a relatively smooth reopening of the economy. Investors in U.S. Treasury securities are focused on the push and pull of short-term deflation and the challenge of rapidly rising deficits.
As we continue to navigate this challenging time together, please take care and be safe.
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