The first half of the year can be characterized as a cycle lost on the majority of closed economies by the pandemic coronavirus. Among the consequences of the measures of confinement are significant reductions in income, rising unemployment and disruptions in the industries of transportation, services and manufacturing.
On the positive side, we could mention that the scanning has accelerated, going to be an option rather an obligation.
In this context, the central banks of many countries resorted to monetary policy, with low general rates of interest. Theoretically, this fact should have promoted rates of loans cheaper and encourage spending to boost the economy. Since then, most of the indices have recovered a good part of the accumulated losses.
Restoring trust will be crucial to the success of the recovery of the economies
Little by little the economy began to recover, thanks to the relaxation of the measures of confinementbut in the last few weeks the pace has lost some momentum against the possibility of a second wave of the pandemic. Restoring trust will be crucial to the success of the recovery of the economies and, to this end, we must accustom ourselves to the new reality.
Apart from the battle against the pandemic, we have the presidential elections in the US. Historically, the volatility in the financial markets grew as the elections drew near, and it seems that this year will not be the exception.
According to the head of capital strategy of Wells Fargo Securities, Christopher Harvey, a presidential victory for Joe Biden could damage the recovery of Wall Street. Ray Dalio, in turn, believes that a victory of Joe Biden will be “initially a negative reaction modest”, but it will not be bad for the markets in the long term, while a victory for Trump to produce an initial reaction beneficial, but “a little less” in the longer term.
Be that as it may, for move on to the third and last state of recoverywhen all sectors can get back to normal, it will require a vaccine for the Covid-19. Until then the road to recovery will continue to looking more like a roller coaster.
Until there is a vaccine, the road to recovery will continue to looking more like a roller coaster
To preserve capital and protect the portfolio from potential declines in market it is important to have a portfolio well-diversified and implement coverages. Also, it is important to rebalancing the portfolio according to your long-term goals to reduce the negative impact.
***Igor Kuchma analyst at Trading View.