While investors price in an optimistic outlook, questions remain as rocky patches look likely
Market rises as global coronavirus cases fall
- Announcement by Boris Johnson regarding re-opening of non-essential shops sways investors towards thought of nearing point of normality again
- Airlines are biggest beneficiaries in the UK with IAG and easyJet rising roughly 18% and 10% respectively
- Yet important to remember this virus is not going to simply go away overnight and businesses and operations likely to be fundamentally challenged for some time
It appears investors are yet again pricing in an optimistic outlook as global coronavirus cases continue to fall and restrictions begin to loosen. Most global indices have seen a tick upwards today with S&P futures currently pointing to a 3,000+ opening. Yesterday’s announcement by Boris Johnson regarding the re-opening of non-essential shops in the UK from 15 June has helped and clearly swayed investors towards the thought we are near the point of normality. Airlines in the UK have been the biggest beneficiary, with IAG and EasyJet up roughly 18% and 10% respectively in early morning trading.
However, what’s important to remember is this virus is not simply going to go away, meaning businesses and operations are likely to be fundamentally challenged for some time. Capacity in some cases may be reduced with restrictions and procedures in place to manage social distancing, therefore hitting demand, and the biggest question of all is if consumer behaviour will have changed when economies reopen. Rising unemployment and the prospect of a new social environment could materially alter the way the economy runs moving forward as individual’s financial priorities shift, which investors will need to have in the back of their minds.
On top of this, it’s likely we’re going to face some second wave of the virus. The challenge of how the country can effectively deal with these is another factor towards how successful the reopening of economies will be to markets. There are still a lot of questions to be answered and it won’t be a surprise to see some rocky patches ahead.
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