C@W channels Ambrose-Evans Pritchard

When I was younger I use to always read AEP, I felt he was the most serious economic journalist in the UK, taking a global view of macro economic events, speaking to key participants and reporting in a complex but persuasive way. As the years go by, his track record though builds up, he always thought the next recession was round the corner and with it would be the end of the world as we know it. In effect, he really is a marxist analyst, much as he would reject that label, his work speaks for itself, somehow capitalism will always fail (well, everything will, he is bearish on China too for balance).

However, at the moment I feel very AEP myself. The markets are nice and frothy, with the FTSE barely 15% down from its pre-Virus year high. The US market is UP this week, after the largest civil unrest in a generation and one hundred thousand visu deaths - obviously.

There are though some key markers coming up, the June quarter rent day in the UK will be important. At last quarter end most rent got paid, but lockdown had only been in place for just over a week. This time it is 3 full months. Landlords have made preparations for this event but it could get ugly. If not enough rent is paid, borrowing covenants will be breached and banks will start to call in their loans. This may set of a chain reaction and credit crunch - not on the scale of 2008, but very bad nonetheless.

Also at the end of June the Q2 GDP figures will come out across the West. These will be bad, with 15-30% falls - for just one quarter. This is far worse than anything in living memory. Maybe if the viurs recedes markets will live with this and look to a better future.

But to my mind, even if we get a quick bounce back, markets can't stay at a mere 12% off pre-crisis levels when the economy as a whole is smaller than this and only is at that level because of hundreds of billions of Government spending and debt creation all over the world.

To me the only question is how big the dip will be in the summer.