27 Jun 2020 2 min

Pandemic economy returns

In the last few days, numerous outbreaks of Covid19 have resurfaced in the USA, with epicenter in Florida. Declarations by the White House have made it clear that a strategy of coexistence with the virus will be followed, without therefore envisaging the spectre of a new lock-down (which instead seems to be the preferred choice for some European countries, first and foremost Italy).

Some influential American asset managers, interviewed in the last two days by CNBC, Reuters and Bloomberg said they believe that portfolio allocation choices will likely return to be similar to those of March-April 2020, and therefore will be based on a marked diversification of sectors.

In this scenario, some of the interviewees criticized the choice of the FED to resort massively to new quantitative easing, considering this a policy of "liquefaction of the economy" that is dangerous in the medium term and of little help in the short term, since the most important effect is the fall in rates and the diversion of flows towards commodities, gold first and foremost. In fact, on the wave of these announcements, on Friday 26/6, the yield of the ten-year U.S. bond fell by 5.6% and gold gained 0.8%, one of the very few rises in a stock market session all in red.

It is therefore likely that the stock market indices will extend the growth phase in the coming weeks, but based on marked sectoral inequalities, we should see a further weakening of the dollar against the euro and the persistence of sustained commodity prices, with gold and silver in the front row.

Study Centre - Hetica Capital