"The world appears to be trapped in a circular reference death spiral," wrote Citi strategists, led by Jonathan Stubbs said in a research note. "Stronger U.S. dollar, weaker oil/commodity prices, weaker world trade/petrodollar liquidity, weaker EM (and global growth)... and repeat. Ad infinitum, this would lead to Oilmageddon, a 'significant and synchronized' global recession and a proper modern-day equity bear market... The death spiral is in nobody's interest. Rational behavior, most likely, will prevail.”
Policymakers would likely attempt to “regain credibility” in the near term, according to the Citi analysts. “This is fundamental to avoiding a proper/full global recession and dangerous disorder across financial markets. The stakes are high, perhaps higher than they have ever been in the post-World War II era."