Virus vs the Markets

Global stocks continue to ride hope of pandemic recovery

Too fast too soon?

Blind hope or sensible policy? Governments around the world attempt re-opening, but is it too early? Will we be hit with a second wave of the coronavirus? Hope is that the worst of the pandemic is behind us now. How can we know? What does the science say? According to the WHO, we should be very cautious and prepare for a second wave as infections are expected to spike.

But for the moment, markets appear very happy with recovery hopes and of the recent vaccine news.

Stock climb

Yesterday, Tuesday 26th May 2020 – stocks enjoyed a bouyant day after U.S. and UK markets were closed for holidays on Monday.

The Dow climbed 530 points to finish the day at 24995, flirting with the psychological 25000 level. S&P 500 closed up at 2992 also flirting with the 3000 range.

The higher the S&P 500 rises without earnings picking up the pricier it becomes. PE ratios look stretched and further gains for the index would come despite declining earnings, stretching these valuations still further.

S&P 500 record high

Dax climbed too, gaining 431 points to close up at: 11505. FTSE also climbed Tuesday to close up at: 6068 despite being closed Monday.

What are bank debt levels?

What happens when banks reveal the true level of debt from defective loans they are likely to need to write off? Time ticks on and the debt levels tick up!

Easing lockdown

Globally, it seems governments are ‘happy’ to forge ahead and ease lockdown restrictions and cross their fingers it will not create immediate secondary coronavirus infection waves. The risk of the virus emerging down the line should not be ignored – it’s still a very real possibility despite the sunshine.

U.S. and China tension

And then we have the simmering tensions with China and the U.S. over Hong Kong and the ‘origins’ of the pandemic outbreak.

USA China Deal

The phase one trade deal is at risk and may well be used as a bargaining tool, however, China has indicated it will adhere to the agreement. The last thing we all need right now is another tariff spat to develop.

I’m not so sure how the U.S. will react – but they will.

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