The past week has been the strongest so far since the outbreak of the corona crisis. Equity markets gained an average return of 10% on a weekly basis, and without major setbacks. This let to hope that the lows of the crisis have already been left behind. One should be careful with such conclusions, however, since the great crises in history are repeated from interim bear market rallies.
For example, from 2000 to September 2001 the DAX fell from 8000 to below 4000, recovered by 40% to 5500 points within 6 months, but then fell again by more than 50% to its final low of around 2200 points by March 2003. Regionally, the United States was the most profitable last week, followed by Europe and Asia. Over a month, the US is even slightly positive, while Europe and Asia follow in places with slightly negative values.
The past week has brought little new knowledge about the weeks ahead. The growth rate of new infections is fortunately declining in most European countries. It appears that the curve is slowly leveling off, similar to that in South Korea or China before. The next days and weeks will bring clarity.
A temporary equilibrium appears to be forming in the markets, with most stock indices having passed their preliminary lows and are on the way up. It remains to be seen whether this branch is strong enough to push the markets further up, whether it slowly gives way again or even breaks off. The possible triggers for the markets are the same, positive news such as a major advance in a vaccine or therapy can accelerate the markets upward, while deterioration in infection and deaths, or especially a surprising bankruptcy of a larger company, can accelerate the downturn.
According to the article by Prof. Dr. med. Dr. h.c. Paul Robert Vogt it seems that there must be doubt about the development of a vaccine. So far, it has never been possible to develop a vaccine against a coronavirus.
Leave a Reply.
Bertan Gueler, CFA