Excited about the rebound? Don’t be.
It is still way too early to turn on the green lights, and while we witnessed European and US markets rebounding over the week, it does not take into account of the fact that new cases and death rates caused by the COVID-19 pandemic is likely to continue increasing sharply in the coming weeks.
Over the past week, the world has indeed ramped up measures to suppress the COVID-19 pandemic. We saw most countries, including China, closing up their borders to foreigners, and in Singapore we saw the stepping up of social distancing measures. Even the Japanese who were holding out until now, finally gave in and decided to postpone the Olympics for a year.
The good news is that once drastic measures are implemented, it is only a matter of time before COVID-19 comes under control. If we look at the time China went into full lockdown, it took about 2 weeks for cases to start to taper off. Unfortunately, the West has only implemented a partial lockdown, so we probably will not see cases tapering off anytime soon…
Furthermore, just last Thursday, the magnitude of the economic destruction already caused by the pandemic was highlighted when the US government reported the highest number of weekly unemployment claims in history: a record-breaking 3.3m Americans seeking jobless benefits within a week.
While the $2 trillion rescue package passed by the Senate will help to soften the blow on the economy, it’s definitely not enough though, so we can expect to see more in the coming months, along with a full spectrum of economic consequences fuelled by the COVID-19 pandemic, its economic impact, and an already weak and flawed financial system being pushed to its limits.
Most importantly, we have to recognize that even in any subsequent recovery, consumer incomes and confidence, which have already been hurt, will definitely need time to recover. Consumer confidence is fragile by nature and severe economic shocks often leave lasting bruises, and this one has barely started… It is wishful thinking that once this crisis is over, that many people would immediately be hopping on a plane, and splashing cash on a holiday, or indulging in other discretionary spending.
Against this sort of backdrop, my advice is that investors should continue to maintain caution instead of rushing back into risk. Needless to say, I will continue to monitor events closely as they unfold and make the best decisions in our clients’ interests.
P.S. I hope you find these ongoing updates helpful. If you have any feedback or questions, please feel free to leave a comment by clicking on the ‘Message Icon’ below. I’d be more than happy to hear from you. Till the next update, take care!
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