Most stock markets have had a strong week. Almost without exception inidices moved upwards worldwide and ensured a good mood on the stock exchanges. On Thursday evening and on Friday, a public holiday, the tide turned again. Despite the losses that then occur, most stock markets are trading in the positive range of 2-7% on a weekly basis. The positive news about the Remdesivir remedy from the American pharmaceutical giant Gilead Sciences was cited as the reason. Tests have shown Remdesivir's positive effects against Covid-19. However, the proof was limited to the fact that it can significantly reduce the treatment time of the sick from around 15 to 11 days. Certainly good news with regard to impending bottlenecks in the healthcare system, but nothing more. Even the question of whether the remedy promises a greater chance of healing could not be proven. In my opinion, the news was regarded a little too positively by the market.
The corona crisis remains the dominant topic. Now that many countries are releasing the lockdown, it is exciting to see how the number of new infections develops. On this website, in addition to the growth rates in the individual countries, I have now also included the change in absolute numbers. The next weeks and months seem to be accompanied by phased changes between tightening and loosening the lockdowns. This will continue until the population is either infected or a vaccine is found. Unfortunately, bleak prospects. Not only for the economy, but also for the everyday life of every citizen.
Despite the current rally, nothing changed in my statement from the previous week. In my opinion, there are still many negative records and black swans slumbering in this market, investors should continue to exercise great caution.
The crash protection risk model already gives partial all-clear and provides the first green signals, which have not yet been confirmed. Since the panic is currently out of the market, you can see at least the first bullish signs on the model side. However, due to the dormant latent risks, I would prefer to build up the equity quota only by accompanied hedging instruments such as put options.
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Bertan Gueler, CFA