A question of confidence
These trading days are tricky. We know that. The market flip flops between focusing on COVID-19 increasing case loads and the hopes of a stimulus inspired economic recovery.
Who is actually confident?
Until the consumer is confident then any hopes of a sustained economic recovery is paper thin. The consumer will need to lead the way through this - to start going out, travelling, using public transport again and returning to the office. Until then it will need fiscal stimulus to pave the way through.
Consumers want to save, not spend.
This is common sense. Many people are concerned about their jobs. So, spending is the last thing on their mind. As many of you know I am the chief currency analyst for HYCM and we commissioned some research at the start of the crisis. We conducted an independent survey of more than 900 UK-based investors (all with investments in excess of £10,000) to find out how they are investing amidst the coronavirus. Of all the data we got it was this point that stood out to me, ' 33% of all investors plan to put more money into their savings accounts over the coming 12 months'.
But that makes sense. If you are uncertain about the future then you save.
50+ aren't taking risks
Statistically the older you are the less likely you will be in wanting to take risks with COVID-19. Until there is a vaccine then you will not be readily travelling around. My nearest and dearest are far from behaving as though life is back to normal. My older family members will most likely wait for a vaccine until they get back to normal. I suspect that pattern is going to be repeated across the world for those fortunate enough to enjoy the luxury of separation.
Vaccine on the way?
According to a Stanford Medicine interview NIH's Fauci is cautiously optimistic that one vaccine will emerge by year-end. there was positive vaccine news from Moderna yesterday. Moderna's vaccine trial produced a strong immune response for all 45 patients in an early stage human trial and the findings show the vaccine could provide protection against the coronavirus.
So, if this is the case then you would anticipate stocks being supported by fresh rounds of fiscal stimulus. If this is the case then the dips down towards S&P500 March lows should be buys.
