Macro Dragon Reflections: Is it enough of the Hammer & Dance Strategy & time to just step through the imperfect Covid-Gateway?

Macro 8 minutes to read
Kay Van-Petersen

Global Macro Strategist, Saxo Bank Group

Summary:  Latest Macro Dragon Reflections, airs the eventual pathway that all countries need to take on, in the perpetual campaign against Covid-19. Perhaps it is time for a final end of the Hammer & Dance Strategy, & just step through the imperfect Covid-Gateway. We need to start to take the 2nd, 3rd & 4th order consequences into account, instead of just focusing on the 1st order effects. You can ride from Covid, but you cannot hide. Sooner or later, we all have to go through that tunnel of turbulence.

Macro Dragon Reflections: Is it enough of the Hammer & Dance Strategy & time to just step through the imperfect Covid-Gateway? 

(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)


  • Step into the mind of a young Padawan global macro investor & trader… & it ain’t pretty. The likely best context, that KVP can give for how he views the world… is varying parts of dislocations, symmetries, positive correlations, negative correlations & generally speaking, just terabytes of noise. The pockets of signals are few & far between.
  • This is why the default MO for the Macro Dragon, is actually do nothing… keep the ship close to shore. Stay calm, yet dangerous…
  • …then what starts to happen in the sea of noise… things emerge… dislocations, that start off as ‘interesting’, then like a slight itch one wants to scratch, then annoying… then the volume gets to 11… & one is like, ‘How can no one else see this?’ This is so crystal clear!!!
  • Ideas are the paragon of the future always being here, just evenly distributed… if you are first through the door & get it right… you’re a pioneer. If you don’t get it right… bam, bam… double tap to the face. Onto the next one…
  • So this brings us to the screaming dislocation that the Macro Dragon has been stewing on. The end-game of Covid-19…
  • Back in the beginning of the outbreak in early 2020 (pre Vaccine, pre the numerous fiascos we’ve seen, pre Biden, etc), a piece on Medium went viral entitled: The Hammer & the Dance. The premise was countries would have to respond with lock-downs, then reopening, then further lock-downs when there was a surge in cases… etc…
  • Being a relative world, all of this made sense at time where everyone was grasping for straws… However time for an update on that piece… & its time for folks to put the hammer away & focus on the dancing…
  • The end-game of Covid-19 is not the proverbial off switch. This virus & future strains are going to be part of the landscape that we are going to be operating on. And we all (governments, citizens, policy makers) have to step through that Covid-Gateway.
  • Its not going to be smooth, pretty, optimal, nor uncontroversial. In fact, that’s likely the only guarantee we have here.
  • The end results of going through the Covid-Gateway is a population that is partially vaccinated (potentially upwards of 60% for the richer nations), has partial herd immunity, is 100% going to see a surge in cases & will also see deaths. Yet Net-Net on the other side of the vaccine release date, the deaths are going to be considerably lower.
  • Now if one was a health official or doctor, naturally one would be advocating the Hammer & Dance for the next 1-2-3-5yrs… this is the adage of a Surgeon wants to always cut…
  • Now that we have the vaccine, the structural issue with the Hammer & Dance strategy, is that its only focusing on the 1st order derivative effects. I.e. keeping the death toll down.
  • Its not measuring the 2nd, 3rd & 4th order effects of the exponential debt that has been created, depression, joblessness, stress, education gaps, rising addiction, rising domestic abuse & the overall vacuum that has been torn into segments of society that actually needed the most amount of help to begin with.
  • And it does not matter if you are Israel, the US, the UK, Taiwan, Australia, New Zealand… sooner or later it will come to a tipping point of having to walk through that Covid-Gateway. Locking down your country, is just an illusion that delays the inevitable.
  • Covid-19 is like Global Macro, you can run, but you cannot hide…
  • This is also what the BoJo administration understand & are implementing – lets hope they can stay the course. 
  • So paradoxically, perhaps the new strategy should be GOOD.
  • New surge in infections? GOOD, this needs to happen eventually… sooner, is better than later. More hospitalizations? GOOD, has to happen & now with the vaccines, the chance of people dying directly from Covid has been greatly reduced. New variant after Delta? GOOD, this is all part of the dance… lets not be surprised by it, we already have new vaccines to address the newer strains (faster spread, yet less lethal that original strain is actually great). Letting people who have been vaccinated forgo masks & have more flexible travel options? GOOD, this incentives folks to accelerate the vaccine process – everyone needs to do their part for a functioning stable society. Keep the economy open, regardless? GOOD, the whip-saw closing & opening up, was crucifying whatever businesses that were still hanging on by the skin of their teeth. We can also stop the debt binge that is seeing G4 Central Bank balance sheet expanding at a CAGR of +15% since 2008 (i.e. $1m in 2007 is now +$7m in 2021).   
  • Underlying point here, there is no pathway without some form of collateral damage… yet with Vaccines out & now well over 1.5yrs into this… we need to start focusing on the 2nd, 3rd & 4th order consequences of staying in the Hammer & Dance spiral, which are going to be multiples of the 1st order costs.
  • All the current strategies are doing is delaying the inevitable. How can, not more people see this screaming dislocation?
  • It will come… it always does. The future is here, it is just unevenly distributed.


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