Forex:A bumpy road ahead

The world has finally seen a glimpse of light at the end of this dark tunnel. The coronavi…

The world has finally seen a glimpse of light at the end of this dark tunnel. The coronavirus outbreak is starting to level off across many countries and cities. Looking at the new daily infected cases and death toll from Spain, Italy, Germany and France, all of those countries seem to be heading into a downward trajectory. Meanwhile, in the US, the governors of New York, Louisiana and New Jersey pointed to cautious signs that the virus outbreak may be starting to flatten.

It saddens me to use a ‘death’ indicator as a financial market tool, but that’s what’s driving investors at the moment. The declining number of deaths registered due to COVID-19 suggests that we are winning the fight against this horrible virus. Total death rates had decreased from 13% at the start of April to 7% yesterday. That’s the first time we have seen a single-digit number since March 14.

The drop in newly infected cases and death toll sparked a sharp rally in equities, with US stocks registering its best day in a fortnight – and its eight best day since the end of the second world war –  as the S&P 500 and Dow Jones Industrial Average both rallied more than 7% on Monday. At this stage, markets are repricing the worst-case scenario due to the virus outbreak, but in my opinion, it’s still too early to justify a prolonged move higher.

Investors moving into risk assets at this stage believe that we’re heading into a V-shaped recovery. Attractive valuations, ‘fear of missing out’ and extraordinary stimulus packages also exaggerate the upside moves in prices. However, no one yet knows the exact damage this virus has already done to the global economy, corporate earnings, and what kind of exit strategies countries will follow in the weeks ahead. Without proper treatment or vaccination, lockdowns could be reimposed and the global economy will then continue to suffer. The corporate earnings outlook is also very murky as the dispersion of analysts’ forecasts are near a record high.  Hence, the road ahead won’t be a smooth one, especially as investors still need to digest a mountain of negative economic data and possibly many bankruptcies.

In my opinion, the best-case scenario is likely to be a U-shaped recovery and not a V-shaped one. The world post-coronavirus is not going to be the same for a long time to come. Social behaviour needs time to return back to normal which means the service sector will continue to feel the pain. For now, let’s hope that we beat the coronavirus and it becomes just a memory of the past.


MyFxtops 邁投 (www.myfxtops.com) -Reliable Forex Copy Trade community, follow the master for free to trade!

Disclaimer: This article is reproduced from the Internet. If there is any infringement, please contact us to delete it immediately. In addition: This article only represents the personal opinion of the author and has nothing to do with Mato Finance The originality and the text and content stated in this article have not been confirmed by this site. The authenticity, completeness and timeliness of this article and all or part of the content and text are not guaranteed or promised. Please refer to it for reference only Verify the content yourself.

Copyright belongs to the author.
For commercial reprints, please contact the author for authorization. For non-commercial reprints, please indicate the source.

本文来自网络,不代表迈投财经立场,转载请注明出处:http://www.myfxtop.cn/analysis/25998.html

为您推荐

联系我们

联系我们

在线咨询: QQ交谈

邮箱: myfxtop@hotmail.com

9:30 - 18:00/Mon-Fri
返回顶部