FNArena’s Weekly Insights – March 23 2020
There are still investors out there who think this year’s Grand Bear Market is all about previous herd exuberance and share prices rising too far, but that is so outdated already.
Following an exceptionally strong performance in January, exuberant share price levels might have been the initial reason why the sell-off was so fierce so quickly, but it didn’t take long before the financial system started to screech really loudly and central banks across the globe had to pull all levers to prevent a major global credit crisis.
By then, however, the world’s focus had already shifted back to what triggered the share markets selling off in the first place, the covid-19 pandemic. It is clear by now global authorities are finding it hard to limit this virus spreading and as they put in place ever more draconian policies, the damage to economies is accelerating really fast.
This is why, on the weekend and last week, I felt all those investors hoping for a relief rally were simply too optimistic. Such a relief rally, I think, cannot happen until global statistics are starting to indicate this global pandemic has progressed past its peak, and we can all start looking forward to less testing times ahead.
So we know what we are looking out for. Alas, to date the covid-19 numbers are still climbing steadily, including in Australia where from tomorrow onwards a lockdown light version will be implemented across the two most populous states, NSW and Victoria. Other states have started to close their borders. The economic damage, already ginormous, is simply becoming even larger.
The damage will continue to grow the longer these exceptional measures remain in place.