Since my last update on Friday, we have seen the introduction of the near full lockdown in the UK on Monday. Yesterday markets across the globe rallied, and as I write today European and American markets are mostly all up after news that Congress and the Trump administration had agreed a $2 trillion fiscal stimulus package. Sterling also strengthened and the dollar weakened on this news. Further government action continues to have the intended effect by providing support to the global economy.
Lothar Mentel, who’s views on the markets and global economy I have forwarded to you previously, released his latest update yesterday, and I thought you may be interested to hear this.
Why have stock markets appeared to rally on the lock-down?
Yesterday the UK followed much of Europe and the US into a painful lock-down of its people and economy, yet today stock markets rally 5-6% by early afternoon – how can these go together?
In this investment update, we discuss how governments’ fiscal support measures for the economy and the central banks’ monetary commitment to provide sufficient capital for bond markets mean capital markets no longer seem to assume a lasting collapse of the global economy. We then explain why central banks’ actions are both suitable and effective to prevent collateral damage from the COVID-19 restrictions driving the global financial systems towards another financial crisis.
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