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The East Wind is Coming

The phrase "The East Wind is coming" is used in England as a warning sign or an indication of the winter blizzard's arrival. This is perfect to describe the last seventy-two hours, where the news of a new variant has not only shaken the governments into action but resulted in a major trial balloon shake-off in the financial world.

The narrative that all is back to normal has just been shown the door and has allowed the jitters of 2019 winter revisited but as they say, this time it is different.

Let me bring some highlights of how different it is. First, the faces immense pressure of inflation that has become the centre point of attack by central banks resulting in asset purchase reduction with a risk of speeded-up pace in January 2022. Second, there is a high risk of a default by largest china based real estate firm, especially on payment of $200Mn that is to be paid on 27th December 2021. Third, there are depleting gas storage levels resulting in an electricity crisis in Europe and soon in the USA.

Though there are more reasons as well these three describe the major theme of the Grinch that might visit around Christmas. The main issue does become that if the action timeline is similar to 2019/2020 then the damage caused and inflation impact in the next eighteen months will be larger and sticky, as the next QE and stimulus will be active till 2024 the year main elections in largest democracies India and USA.

The normalcy is within such volatile times, but the audience at large has to be cautious at all times as the narratives changes as per the need of the hour.


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