It is hard to believe that we are now a year removed from the declaration of COVID-19 as a global pandemic. Vaccinations are occurring at a global scale yet it is still not clear when life will return to “normal.” Depending on where you live, you may be further down the road to normal life than others. Here in Texas, mask mandates were lifted two weeks ago and all businesses have been allowed to return to 100% capacity. Around Houston, many (but not all) businesses are still requiring masks and are choosing to operate at less than 50% capacity. Regardless of what level of protocols your state has in place, I do believe that the United States will not return to a full or even partial lock down like we saw in 2020. However, this is not the case in other parts of the world which is creating volatility across equities, bonds, and commodities.
Recent lockdowns in France, Germany, and Italy are threatening to hinder the progress of the recovery in Europe. This is largely due to the poor rollout of vaccines resulting in a spike of COVID-19 cases. The threat of a stunted economic recovery in Europe has the potential to spill over into other parts of the world resulting in widespread slowdown of global recovery. We are already seeing the possible effects of this on the global markets. As of March 23rd, the global equity markets all suffered down days with the three major US indexes down one percent, on average. What is slightly more concerning is that this slowed recovery is likely to impact the oil and gas markets. West Texas Intermediate (WTI) closed the day over 6.5% lower, down over $4 to $57.55. On average over a 12-month period, $60 oil is a good barometer on the upcoming activity in the US Gulf of Mexico. This recent downward trend on WTI is something to keep an eye on but is not yet a reason to doubt the a recovery in 2022. I will keep an eye on these markets and remain cautiously optimistic on the US GOM recovery through this timeframe.