The stock markets around the world have had another positive week. The signs that the panic is completely gone are increasing. This is despite the fact that economic data crosses unprecedented levels (applications for unemployment benefit USA, Chart 1). The corona crisis remains the dominant issue and a solution still seems a long way off. Nevertheless, the familiarization effect has set in among market participants, so that events such as the continuing high death rates in many countries (e.g. France, Italy and Spain with over 10%) and a sudden rapid increase in the numbers in Singapore no longer have any price relevance. As a result of the easing decided by local countries, there is still no negative trend in the number of new infections. In Germany, even the upcoming reopening of the first soccer league, Bundesliga, is pending.
The stock markets were able to continue the almost unabated success of the past few weeks. Some of the strongest markets come from the United States, the country most affected by the corona virus. The US indices rose 4-8% on a weekly basis. In Europe the picture is mixed, on average there is a slight gain of approx. +1%. The UK and medium-sized German companies from the MDAX are particularly strong at +4%. The southern European countries, on the other hand, tend to be neutral to slightly negative. The picture is mixed in Asia too. While Southeast Asia is slightly negative, India is losing -5% and lies therefore opposite compared to the global trend. Japan, China and Australia, on the other hand, are strong Asian markets with 4-8% gains in the past week.
he crash protection risk model provides further signs of relaxation. Even if the green signal on a daily basis has not yet been confirmed, this is becoming more and more likely. In the upcoming week, the global risk status could change from red to yellow. The positive signal is based equally on the regions of America, Europe and Asia.
Despite a temporary all-clear, investors should continue to act very carefully in the current environment. A build-up of the equity quota can be accompanied by put hedges to protect against the scenario of sudden panic losses. In my opinion, there are still many negative records and black swans slumbering in this market
chart 1: jobless claims USA
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Bertan Gueler, CFA