Rise in risky assets despite worsening Pandemics

 

Written: 20/11/23 07:05 GMT FXTM Senior Market Strategist Hussein Sayed 

Eight days are left until the end of the month, but the number of Corona 19 confirmed cases in the U.S. has increased by a quarter since the declaration of Pandemics in November. As the number of confirmed cases increases rapidly every day, in most parts of the U.S., the recommended number of confirmed cases is over 5%. The number continues to grow amid significant stress in the health care system with at least 83 million patients in Corona 19.  

While the number of confirmed cases in Europe is at its peak, other countries such as Russia, Japan, Canada and Turkey are struggling with the ever-increasing number of infections. 

If Pandemics is a risk indicator, risky assets such as stocks and raw materials should have plummeted. But some stocks are near record highs, as investors are looking for a hopeful future. 

According to a monthly BofA survey of fund managers worldwide, the portion of cash in investments has dropped to a record low of 4.1 percent since January, indicating a clear bullish mood among investors. 

It is not known whether the white-room rally will continue further or take a breather for a while.   However, a lot of good news has already been reflected and the economic damage from the secondary or tertiary Corona19 fad is still uncertain. Fiscal policy will continue to play an important role in preventing a double-dip recession and investors will keep an eye on central bank action until they are confident that the economy will work well without stimulus.

Today's economic indicators show how recent European lockdowns have affected business activities.  PMI Reserve for Manufacturing and Service in Germany, France and the United Kingdom will be announced. Decreasing is inevitable, but the rate of decline is the focus of attention. If the economy has deteriorated sharply, the ECB and BoE will have to come up with additional stimulus by the end of the year, but unless it is a bold fiscal policy, it will have difficulty in boosting demand.  

On Wednesday, the latest FOMC minutes will be released. Investors are interested in whether there is no change in the asset purchase program in December and thereafter. The Fed can increase its purchases of U.S. bonds from the current $80 billion a month and expand its purchases to long-term products. These measures will limit borrowing costs but require fiscal stimulus to prevent another plunge in economic growth.

The next few weeks are expected to be a mix-up between vaccine hopes and Pandemic reality. But in the long run, it's going to be a low-cost buying opportunity