For most CFD traders out there, how financial assets had performed during the past two months could be completely irrational. It is now becoming a big question mark because the COVID-19 pandemic is here to stay and it continues to grow at an alarming pace. We’ve already talked in our earnings preview why investors won’t pay close attention to the latest financial figures, so today we are back with another material on the pandemic.
# Massive rise in cases – markets don’t care
Across Europe and even in the United States, new COVID-19 cases are rising at an alarming pace. Germany, France, Spain, and the UK all reached new records and the risk of new restrictions is looming. However, none is committed for a new full lockdown as in March, so the markets are hoping that economic activity would not be damaged that hard.
At the same time, we’ve already talked about the K-shaped recovery and its implications. Unemployment is still high, some sectors are well-below their 2019 peaks, but the financial industry continues to be favored by cheap access to liquidity. Stocks and bonds are thus very expensive in relation to cash, so even we don’t like it, this is how the conditions could remain.
# Governments to provide new stimulus if needed
Persistently-weak economic conditions will mean one thing – more money printing and more government spending. That puts big companies in a good position for good revenues and outperformance in terms of other financial indicators like EPS. The longer this thing goes, the worse would be the downside when it occurs, but until then, we are CFD traders and the short-term outlook is what we base our trading decisions.
# Cures and vaccines to come in the months ahead
Now that the weather is getting colder in the Northern hemisphere, people have to stay more inside and thus favoring the transmission of the coronavirus. Still, despite pressure on the medical system, death rates are still below the April peak, globally, which means humanity had learned how to cope with the disease better.
On top of that, vaccines and other therapeutics are expected to come in the months ahead, providing a new relief. Mitigations methods will continue to be in play even in 2021, but people will be more confident to get back to normal habits, as long as effective cures will be widely available.