George Lucas, Raiz Group CEO
Global equities have just suffered their worst week since the market volatility in March when investors finally realised the full health and economic consequences of COVID-19. The market is attributing the sell-off to caution over the escalation in coronavirus cases and the US election, with the US tech titans the latest casualties in this selling.
I believe it is more about the election than the new wave of coronavirus sweeping the US and Europe, with the presidential and congressional polls probably creating an uptick in financial market volatility this week.
In my opinion the key will be who wins the US Senate.
If the Democrats win the Senate and keep the House, then I believe the markets will rally on this new political reality no matter who is elected President. This is because a Democratic Senate and House will pass a larger fiscal stimulus package than if the Senate remains Republican. If it remains Republican then a larger stimulus package will be difficult to pass no matter who is President.
If there were real concerns about slowing global growth, due to upticks in coronavirus cases in Europe and the US, it would have been seen in the energy market, which has been volatile but nothing like the sell-off that occurred in March. We also have not seen an uptick in gold; it continues to trade below its August highs.
It will be a choppy week for the markets as the US election approaches – not a time for hasty decisions. So stick to your investment strategy. The markets will remain focused on what could go wrong rather than what could go right – and a lot could still go right.
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