Smith's publications

The rollercoaster ride that is the U.S. economy is likely to continue through into the first half of 2021.

On August 4th the port of Beirut was the scene of a horrific explosion, which killed more than 150 people, injured 6,000 and left some 300,000 homeless. The damages are estimated to be in excess of $15 billion. The city’s hospitals, already struggling due to the COVID-19 pandemic, were damaged by the blast and swamped with injured. On top of already raging economic and political crises, the explosion now raises the question of food security. Prior to the explosion, 80 percent of Lebanon’s imports passed through Beirut’s port. Without a functioning port in Beirut, the country now relies on a handful of secondary ports, chief among them being Tripoli in the north, to import food and to export its products.

A COVID-19 pandemic, rising business bankruptcies, pressure on government finances, a global economic meltdown and an increasingly tenser relationship with China – what else could go wrong for Japan? Apparently, there is one more thing: Fitch has changed its outlook for Japan’s “A” sovereign rating from stable to negative. Moody’s rates Japan “A1” (stable) and S&P gives Japan a sovereign rating at “A+” (stable). We think it is possible to see Moody’s and S&P follow with negative outlooks later in the year. Smith’s shares many of the same concerns with Fitch about Japan’s credit picture and has a negative outlook. Moreover, Japan’s deteriorating creditworthiness is significant in that the Asia-Pacific country is the world’s third largest economy, a leading exporter and staunch U.S. ally. The deeper Japan sinks, the messier Asia’s geopolitical landscape becomes.