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Notes -
Is anyone else starting to freak out about the whole Hormuz situation? 13% of the world's oil, 22% of global LNG and a sizeable chunk of fertilizers is blocked. That means 13% fewer big machines running. That is a major decrease in the global economy. Yet markets seem surprisingly stable and people don't seem to be freaking out despite the impending cliff.
Is Trump actually crazy enough to cause a major crash in the global economy or is he willing to admit defeat and pull out? How bad will this crisis actually get?
Not only are they stable, the global stock market (as measured by VT)—the aggregation of forward-looking, skin-in-the-game outlooks for the world economy—closed two days in a row for record highs on Thursday and Friday. This is on the tails of having just hit a then-record high about two weeks ago prior.
We're now up about 2.7% since before the war begin, which is a good return for a two-month span. On the country level, it has been well-demonstrated empirically (thus, confirming the theoretical expectation) that stock market returns are a strong predictor of future GDP growth, and the global stock market is just the collection of country stock markets across the world.
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