A question of confidence

Trading days have been tricky recently with the market flip-flopping between focusing on rising COVID-19 and the hopes of a stimulus inspired economic recovery. However, the hopes of a ‘V’ shaped recovery have not materialised. Until the consumer is truly confident then any hopes of sustained economic recovery are paper-thin. The economic recovery needs to consumer-led for consumers to start going out, traveling, using public transport again, and returning to the office. Until that confidence returns it will need fiscal stimulus to pave the way through.

Consumers are uncertain

The problem is that consumers don’t have the confidence to spend. This is common sense. Many people are concerned about their jobs and what the future world looks like post-COVID-19. So, spending is the last thing on their mind. HYCM commissioned some research at the start of the crisis where an independent survey of more than 900 UK-based investors (all with investments in excess of £10,000) was conducted to find out how they are investing amidst the coronavirus. Of all the data receivers it was this point that stood out, ‘33% of all investors plan to put more money into their savings accounts over the coming 12 months’. But that makes sense. If you are uncertain about the future then you save. The problem is that consumers need to spend to add to economic recovery.

COVID-19 hits older people the hardest

Statistically the older you are the less likely you will be in wanting to take risks with COVID-19. It is a more serious illness, statistically speaking, the older you become. Until there is a vaccine then you will not be readily traveling around. Older people will most likely wait for a vaccine until they get back to normal. that pattern is going to be repeated across the world.

Vaccine on the way?

According to a Stanford Medicine interview, NIH’s Fauci is cautiously optimistic that one vaccine will emerge by year-end. there was positive vaccine news from Moderna yesterday. Moderna’s vaccine trial produced a strong immune response for all 45 patients in an early-stage human trial and the findings show the vaccine could provide protection against the coronavirus.

So, if this is the case then you would anticipate stocks being supported by fresh rounds of fiscal stimulus. If this is the case then the dips down towards S&P500 March lows should be buys.