“Beware of the Ides of March,” a soothsayer once warned Julius Caesar. Surely, such a fanciful expression has a history that we can all look back to. In Roman times, the Ides of March, or the 15th of March harks to a time when Julius Caesar was betrayed and assassinated around 44 BC at a meeting in the Roman senate. His death on that inauspicious day in March led to civil war in Rome that included the execution of 300 senators, knights and brought the empire to a time of political discourse, unrest, and economic upheaval. From then on, even in Shakespeare’s time sixteen centuries later, what is now referred to as March 15 (or Ides of March) conjures of something foreboding with betrayal and disaster.
The same can now be said of the global markets: Beware of the Ides of March. We have in the last few days witnessed seismic global economic events. In China with explicitly clear signs of growth stalling and the Brooking's Institute commenting that Beijing has overstated the size of its economy by 12%, Europe with an alarming slowdown and a total reversal of recent ECB policy to now ease monetary conditions again and in the USA unwelcome job numbers.
Markets had generally calmed, even improved since last December 2018, all the way to the end of February of this year – and all thanks to prior quantitative easing. It is no secret that five of the key central banks in the world have flooded the global economy with cheap cash via easy monetary policy. This is best shown with that scary statistic that the broad money supply worldwide has been running at +27% in the last three months.
All good things must come to an end – as they are clearly abnormal and unsustainable. If these central banks keep on printing money without the proper macroeconomic fundamentals to spur real growth – the world could look like Venezuela or Zimbabwe. Cheap money has indeed buoyed the stock markets and has extended the illusory bull-run, the longest we’ve had so far.
But for those who have recognized the writing on the wall, sell your entire stock and bonds portfolio while you are at it. It is also interesting to note that by the end of February, gold and silver have broadly risen, and cryptocurrencies too have shown renewed strength. That means one thing, there is a trend that is moving away from disaster.
Of course, there is Brexit that could still further agitate global markets. Whatever happens, Brexit or not, the ECB will remain on the defensive which could distract from its participation in the global agenda. A distracted ECB may mean a pause in participating in that concerted effort to keep the global economy afloat.
Then there is Italy, a growing pain in the EU’s Brussels HQ. Signore Salvini is determined to lead Italy outside of the Eurozone and this could spell a backlash from other EU members to follow suit: Greece, Spain, and Cyprus to name a few. If this happens Brexit is going to be the least of the EU and the ECB’s worries.
The forthcoming & unfolding events of this March force us to watch out with prudence and reflection. Amidst all the noise, the smoke and mirrors, be wary of those small telltale signs that speak of the real story.
After all, forewarned is always forearmed.