Trading on COVID-19 – April 8, 2020

Fiscal stimulus and support from the Fed are in place, and more from the federal government may be on the way.

• Measures taken have stabilized markets, at least so far.
• Investors are expecting a steep economic downturn in the second quarter.

What’s next?

Short term, investors are trading on the path of COVID-19. Signs that new cases in the U.S. may be stabilizing have supported shares this week.

• It’s a sign that mandatory business closures and social distancing may be working.

If this is the case, investors will begin asking, “When might the economy reopen?”

Market pulse

Investors are trying to price in an economic rebound during the summer.

We are seeing signs of stability in China and South Korea, as the spread of the virus has slowed and businesses reopen.

Investor’s corner

We are grappling with an unprecedented shutdown of large portions of the economy.

How markets perform in the coming weeks will likely depend on the path of the virus, and the effectiveness of fiscal support to businesses and the unemployed which are designed to prevent longer-term economic damage.

There are no precedents to model an eventual outcome and more stimulus may be needed. But an economic recovery seems likely to occur later in the year when fears over the virus begin to subside.

Created 2020-04-08 15:34:27