The global rally continued last week. Is it sustainable and are we out of the bear market?
Coronavirus
The week got off to a good start as markets heralded a slowing infection and hospitalization rate across the globe. This momentum carried through the first two trading days of the week. Fatalities late in the week spiked in New York, however, there was reason for hope as new hospitalizations were stabilizing. To be clear, the stabilization was at a high rate.
Stimulus
The stimulus packages keep coming. The government is preparing to send checks to many Americans this week. While that is happening, Congress is starting the discussion on a new package already. Preliminary estimates put the next package at $1T. It will be targeted at extending unemployment benefits, additional checks to Americans, and small business lending. Monetary stimulus extended last week as well. The Federal Reserve Bank established a $2.3T package for lending to small business and sub-investment grade issuers.
Europe
A swath of plans for attempting to restart segments of European economies were announced last week. These efforts may have been a bit premature as infection rates have still yet to plateau. This increases the risk of a second wave, defeating the purpose of the initial shutdown. Many of those plans will likely be scrapped as rates increased after being announced.
China
Wuhan… Where this all started… Reopened this week. In its first week since China’s Lunar New Year holiday, travel exiting the city was rampant. This was not surprising. Those who had travelled there for the holiday were stuck there for the last 10 weeks. Eyes will be on the city to see if efforts taken to stop the virus were effective.
Oil
Further assisting the rally was movement in the oil markets. Hopes of a 10-20M barrel cut in production was rewarded as talks commenced Thursday. The number quickly deteriorated, ending the day closer to 5M. Over the weekend, the final number of 9.7M barrels was agreed upon. While representing 10% of global supply, the good news is that the price war is over… for now.
Conclusion
Bear Markets commence with a fall from the previous peak by 20%. They are fairly infrequent (24 in the last 100 years). Some measure the exit of the bear market as when we are not greater than 20% below the previous peak. A more likely definition would be the point at which the previous highs are recaptured. Much uncertainty usually remains until this occurs. As mentioned in last week’s Market Thoughts, stay cautious, as the road is often long and rot with potholes!
Your Future… Our Services… Together!
Your interest in our articles helps us reach more people. To show your appreciation for this post, please “like” the article on one of the links below:
FOR MORE INFORMATION:
If you would like to receive this weekly article and other timely information follow us, here.
Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.