The $2 trillion emergency stimulus package in the US creates some of the biggest one-day gains in generations
US sees back-to-back gains for the first time in a month
- First two days of back-to-back gains in the US for about a month and some of the biggest one day gains in generations
- Markets have been trying to find a bottom and these packages should help in establishing that for the time being
- We will not see the impact of these measures immediately, especially when we are in lockdown conditions
- Investors would be better advised to drip feed into the market through collectives rather than take bets on individual shares.
The huge stimulus packages in the US and Europe have given a shot of adrenaline to financial markets, with the first two days of back-to-back gains in the US for about a month and some of the biggest one day gains in generations. The markets have been trying to find a bottom and these packages should help in establishing that for the time being. However, now politicians have signed off on these packages, what next? This morning’s 3% pullback on the UK markets is a reflection of having the stimulus, and some traders taking profits and pondering what’s next.
It’s likely to be a case of “wait and see” if these packages are working, but we will not see the impact of these measures immediately, especially when we are in lockdown conditions as we can’t spend and therefore can’t assess the health of consumer demand. We have to wait until the lockdown conditions in countries around the world have been relaxed and these will only come about if data on the spread of the disease is positive. Markets will be trading blind for a little while, not knowing whether the stimulus packages are enough in this unprecedented situation. Markets for the time being will continue to gyrate according to data on the outbreak itself, the economic data such as the hikes in unemployment and jobless claims that are to come, the collapse in retail activity, and the potential corporate failures.
This sounds bleak, but we will get through this as China and Korea have demonstrated and there are always investment opportunities. I believe those lucky enough to have cash on the side-lines would do well to start investing for a longer term horizon. However, at this stage, investors would be better advised to drip feed into the market through collectives rather than take bets on individual shares.
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.