There will be a few rallies like this on the way down IMO. I reckon max market panic will be in a week or two as Europe peaks and the extent of US infections becomes apparent.
The problem with trying to predict all this is if course that this could be the trigger for a broader global recession, austerity measures, more money printing or qe or whatever they think of next, asset inflation and the global unrest that goes along with that. If so the next few years would resemble the years after 2008 and it could take years to slowly recover.
I’m hoping for a relatively swift recovery though after this long overdue correction.
We’ll also have companies starting to report the actual impact of this shortly, that’s likely to add to volatility over the next couple of months - which could mean moves upwards of course if we’ve over-corrected on the way down.
It is a dead cat bounce as far as I am concerned. There are rumours of upcoming worldwide QE over the weekend.
However, more monetary easing can’t fix over indebted and overvalued businesses. Not to mention that monetary easing is less effective after a decade of it - like a crack addict needs ever more and harder doses to get his fix, that’s where the economy is at now.
Hardly matters for now, as the us and Uk are entering the second stage of the pandemic. Good for Chinese economy, will have minimal impact on US and UK markets at the moment.
Doesn’t matter if your own country is in the midst of the pandemic. The only thing that China shows is that a virus will pass, everyone knew that.
What it doesn’t show is how bad it will get for the US and UK, how long it will take, or whether it will drive either of those countries into an economic recession. The US and UK are much more highly leveraged (one out of six publicly quoted US companies, for example, do not earn enough to repay interest on debts).
The US also has much less federal leeway to stimulate markets as interest rates are already so low. The $1 trillion repo bazooka yesterday smacked of desperation - too much monetary easing becomes a sign of weakness, rather than strength. Markets didn’t like the cowbell. We are now in Quad4, where both growth and inflation have slowed, and the Fed is struggling to counter it.
Finally, the US can’t take dictatorial measures like the Chinese could to stop spread of the virus.
That’s what is driving the VIX and is what the markets are pricing in.
Sir Patrick Vallance, England’s chief scientific adviser, has defended the government’s approach to tackling the coronavirus, saying it could have the benefit of creating “herd immunity” across the population.
