Fed sets stress test scenarios for 2021

[jazz]

maybe errol, TA and AE can chime in.

Arent we being told the economy is on a V shaped rebound? Weird time for a stress test.

Careful...

https://www.americanbanker.com/news/fed-details-stress-test-scenarios-for-2021 Fed details stress-test scenarios for 2021

Whether big banks would be resilient to a severe recession, an unemployment spike and a stock market plunge will be tested

The next round of U.S. stress testing for big banks will examine the impact of a severe global downturn, a spike in unemployment and plunging equity markets.

The U.S. Federal Reserve Board has published the hypothetical scenarios that will be used in its 2021 round of bank stress tests, which evaluate the resilience of large banks amid loan losses and the capital impacts of a sharp economic downturn.

This year’s tests will evaluate the effects of a recession that starts in the first quarter, amid a “severe global downturn,” and which features “substantial stress” in commercial real estate and corporate debt markets.

The scenario also includes a 55% plunge in equity prices, amid falling GDP and rising unemployment.

[jazz]

UK covid update, after 3rd or 4th lockdown. Still in one I think even though they have high vaccinations rates.

https://www.ft.com/content/96e19afd-88b3-4e8d-bc3e-a72bd1f60d3c UK suffers biggest drop in economic output in 300 years

https://www.nytimes.com/2021/02/04/business/bank-of-england-negative-interest-rates.html The Bank of England Tells Banks to Prepare for Negative Interest Rates

[Austrian Economics]

If you ever wanted a real time stress test for the economy, we are probably right in the middle of one as we speak.

It's anyone's guess as to how long an economy can be run through a blender before it falls apart completely, but we'll find out soon enough.

Some of the economic numbers continue to be pretty ugly in Canada. Unemployment is heading back up, while revenue at Air Canada is down 85% this quarter. With the new travel restrictions, that won't reverse anytime soon. Consider the impact not only on the airlines, but on airports, maintenance and production facilities, catering and hotels.

By all accounts, Newfoundland is bankrupt and I suspect most provinces are not far behind.

Most Canadians seem nonchalant about this, but if they took the time to look into where their pension funds have parked their money, they might have a different attitude. Pensions don't put it all into Apple or Amazon, so those that invested in Air Canada and industries associated with it are already feeling the pinch.