June 16th, 2020
After the Federal Reserve said it will begin buying individual corporate bonds under an emergency lending programme, investors cheered the news, with U.S. stocks climbing to their day’s highs yesterday, after trading in red earlier. Global equities have also shaken off the gloom from previous days, and have risen smartly today.
Today’s chart shows the bounceback in retail stocks and economic sentiment surveys on both sides of the Atlantic as economies reopen from lockdowns. See below for another chart on the stringency of the lockdowns.
Graphic by Ritvik Carvalho
Here’s Mike Dolan’s take:
After all the understandable "2nd-wave" anxiety of the past week - it's not clear a great deal of the bigger picture has changed. Central banks and governments are hyperactive in policy support - but they have already committed to that as long as the pandemic lasts and beyond. That should hardly be surprising to investors at this point. Re-openings of economies happen apace and activity levels continuing to climb - NYC business surveys, Germany's ZEW, UK shops and cinemas up and running again and real-time trackers of economies are steadily climbing - Jefferies’ version for the US has popped above 50% of pre-COVID levels for first time from a trough of 33% in April. And thankfully a second wave as such is not materializing just yet, the national virus picture in US and China remains on a positive downward trajectory. It appears the isolated Beijing outbreak is under control, two new New Zealand cases get headlines but they've been identified and tracked quickly. Higher implied volatility levels in markets cover this inevitable headline risk, though it should take more than that to change long-term positioning.
Charts by Ritvik Carvalho and commentary by Mike Dolan
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