Bassanese Bites: Unresolved – October 26 2020
Global equities pulled back last week, interrupting the rebound we’ve been enjoying so far this month after the September correction. The theme of the past week is ‘unresolved’. U.S. fiscal stimulus talks are ongoing and as yet unresolved. Ditto the UK-EU post-Brexit trade deal talks. The global COVID-19 crisis also remains unresolved, with rising cases and a return to a range of social distancing restrictions across Europe. Some good news came with a larger than expected drop in U.S. weekly jobless claims and ongoing generally good U.S. earnings reports.
Most critically for global markets, however, while a third wave of COVID-19 cases is mounting in the U.S., to record highs, there remains a very low political appetite for renewed restrictions – in part because death and hospitalisation rates remains well down on that seen earlier this year (see charts below). Of course, if the case count in the U.S. keeps exploding then the currently lower death and hospitalisation rates could easily become far less tolerable. Indeed, markets have yet to focus on the risk of potentially greater Washington tolerance for lockdowns should Biden be elected President.