Last week it was possible to observe a notable recovery in the main world stock indexes, where the S&P500 rose by18%, having had the best week since 2008, the Dow Jones had the best three days since 1933 and the Portuguese PSI-20 had its biggest rise in a decade. The question that has arisen from this is whether we have already reached the lowest point of that bear market and thus we are close to the start of a new bull market or if the worst days have yet to come.
In the essence of this appetite for risk is the monetary and fiscal stimulus of several governments and, in particular, the approval by the US Congress of the budget package proposed by the Donald Trump administration and the decision by the European Central Bank ( ECB ) to apply the 33% self-limit to the purchase of government bonds.
However, the most important variable is the final duration of the pandemic and the lifting of containment measures to restrict its spread. And as this is still not very predictable, its real economic consequences are unknown. What is contained in the price at which the indices are quoting are not the possible effects of this crisis, but the way the market feels about them. In reality, it is very difficult to project a company's future earnings when they have no idea how much they will be affected.
At the moment, fundamentals end up being of little importance since they are of low quality, but there is an expectation that markets will recover faster than the economy, leading to these days of greater confidence. Goldman Sachs estimates that the S&P 500 will end the year of 2020 with over 20% of current market levels, but there will be further falls in the markets before that happens. Moreover, the Volatility Index (VIX) remains at quite high levels reflecting the existing doubt about the consistency of a bull market.
The panic that led to the sale of shares seems to have subsided as a result of stimulus measures, but the markets remain focused on the news that invades us every day and its inherent uncertainty. Nevertheless, this makes it almost certain that it is difficult to say that the worst is over. Despite this, it could be normal to think that with all the stimulus that is expected, the perception of the future is now less drastic.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade. Indiscriminate reliance on illustrative or informational materials may lead to losses.
We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.19% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2023 Teletrade-DJ International Consulting Ltd
This website is operated by Teletrade-DJ International Consulting Ltd, which is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11. Teletrade-DJ International Consulting Ltd is located at 88, Arch. Makarios Avenue, 2nd floor, Nicosia Cyprus.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.
Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.19% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.