Market Drivers For June 26, 2020
Asia and the EU
- EU Business and Consumer Survey75.7 vs 80
North America Open
It’s been a quiet night of trade in the markets with Asia opening lower to start the week, but early Europe rebounding leaving markets essentially flat.
There was little market news to drive flows, but the lingering concerns over coronavirus have cast a shadow over markets, as total infections reached 10 million and total death toll crossed the 500,000 mark. However, fears about the pandemic are having less and less impact on capital markets, as investors accept the fact that the battle against the virus is likely to be an ongoing one for at least a year. Meanwhile, with mortality rates declining and new protocols having success, the markets have decided that the existential risks from COVID-19 have disappeared.
That may be premature at this point, especially if death rates begin to climb at an alarming rate, forcing governments to institute draconian lockdowns once again. But it’s clear that the market wants to move on and focus on economic matters.
To that end, investors may be far too optimistic than the current facts merit. The V-shaped recovery in stocks has been driven by the assumption that the consumer, especially the US consumer, will come back with a vengeance, but the persistent spread of COVID will not only limit mobility and transactions but could trigger massive permanent shutdowns in retail, as demand never comes back. That is turn is likely to have ripple effects on income and, with the current US Congress hesitant to spend more on direct payments, the rebound in economic activity may fizzle, taking stocks down with it.
For now, the markets remain wary, as they watch both daily COVID figures and the political jockeying by fiscal authorities, as investors set up for the next move.