Is the Oil Shock Over Already?

Yesterday’s oil panic, with prices as low as WTI $27, seems to have been enough for Saudi and Russia to signal that they are talking about patching things up. This diplomacy is enabled by trash-talk from both sides, absurd lies threatening levels of production neither can quickly achieve nor long sustain. But time is not on our side, with low oil prices putting stress on credit markets and courting the risk of systemic events. The Trump administration is promoting economic relief in the form of a payroll tax holiday, which we expect will get bid up by Democrats into something that looks more like “stimulus.” These developments take some pressure off.  US equities still haven’t quite registered a 20% correction and yesterday’s panic may not be enough to resolve the market’s response to the newly combined Covid-2019 and oil crises. But we think a little more timid averaging in is appropriate.