There is no doubt sentiment is mixed out there, looking at the world economy we have many analysts talking recession and depression. But don’t forget, governments of the world are pumping record amounts of money into there economies to keep them from crashing. Not much has changed overnight, we are still seeing the battle of Stimulus vs Recession.
We are starting to see more and more commentary around whether Keepers allowance and increases to Seekers will continue past September. The Government continues to hold strong that it is a temporary measure only and will be reviewed in July. Whilst Donald Trump in the US continues to talk big, suggesting there is more to come. The Fed continues to prop up markets with QE infinity.
Markets will continue to watch and wait for further news on Fiscal and Monetary policies. Expect volatility to rise again if they start talking hawkish in any way, or if we see government support to the unemployed removed too quickly.
For now, markets will likely remain on current paths edging higher to sideways, the biggest risks are either the spread of COVID-19 worsens when economies reopen, or governments stop giving increased unemployment benefits.
Earnings overall are being revised lower with many analysts trying to price in the damage from COVID-19. This really shows that we cannot rely on last year’s earnings data to predict the near future. Recently we have seen the banks report and either delay or reduce dividend payouts.
With U.S markets keenly bouncing from resistance, and their futures showing further declines this morning, our market is set to continue its falls today. We anticipated their move, with our own market bouncing from the top of the channel at roughly 5500 or so.
If U.S futures remain weak during our trading session today, we should continue to remain week. Otherwise if we see them have a move back to neutral or even nudge into the green, it should spell a rather indecisive day for our market despite the strong falls we saw overnight.
US shares fell strongly overnight after US officials were fairly negative in a series of statements overnight. Dr Anthony Fauci, the top US infectious diseases official, warned that by reopening too quickly, the US risked being set back on the road to economic recovery. On the other side of things we also saw several of the regional Fed Reserve governors come out and say that the longer that shut-downs persist the greater the chance of a prolonged depression and that more fiscal stimulus will be needed due to the expectation of a gradual, muted recovery.
Already US unemployment sits at around 15 percent and forecasts for economic growth are quite dire, although it is worth noting that since World War Two after every previous quarterly GDP decline of more than four percent, the S&P 500 index has risen at least 10 percent and an average of 27 percent over the subsequent twelve months.