This translation has been automatically generated and has not been verified for accuracy.Markets have just been betting that stocks will do what they always do - climb over time. And knocking a third off world equity prices in less than a month appears to have been enough of a discount for many investors to take account of the deep but temporary coronavirus shock.
Goldman’s forecasts for annual gross domestic product rates, preferred by company analysts, point to a “U”, but quarter-on-quarter stats of the macro world show a very angular “V” with “growth rates in H2 that are unprecedented in postwar history”.Rallying markets have merely latched onto this strange world to price what most expect to be a sharp rebound later this year.
Yet the speed of this unfolding crisis and rescue means we’re still only 44 trading days from the last record high in the MSCI global index and only two weeks into a quarter likely to see the biggest implosion in global GDP on record - in a year forecast by the International Monetary Fund on Tuesday as the worst contraction since the 1930s.But bear markets typically end when a recession eventually hits, and markets are likely already pricing in a recovery that the IMF expects to record a 5.
And if markets continue rising over time anyway, then deep drawdowns will always attract investors that assume GDP and earnings growth won’t just flatline forever and governments and central banks can indeed limit the damage in the interim.Hedge fund manager Stephen Jen of Eurizon SLJ Capital points out that in 15 U.S. recessions over the past century, Wall Street stocks preceded the trough in the economy by about five months.
Bank of America’s latest survey of fund managers showed a majority expect a U-shaped recovery and remain in “peak pessimism” with cash balances of 5.9% - the highest since the 9/11 attacks in 2001.
globeinvestor What is this obsession about 'market' recovery. What market? Casino market that is stock exchange? How about meet market, TP market, bread market , labor market... the real markets, not speculative stock market. This is one more thing that will change, big time