Equity and credit markets can retest current lows, warns Chris Wood

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Over the previous few weeks, Covid-19 hit, stimulus buoyed markets world over possess risen conclude to a ‘bull fragment’, from time to time defined as a upward push of 20 per cent or extra from the current lows

Puneet Wadhwa  | 
Original Delhi 

Equity and credit markets can trek attend to their current lows, and presumably plod even additional if the infections precipitated by the coronavirus (Covid-19) pandemic obtain now now not top out by April-stop, wrote Christopher Wood, global head of equity approach at Jefferies in GREED & terror, his weekly exhibit to merchants.

“Within the now now not going case where infection charges obtain now now not top out by the stop of April, stock markets and credit markets will re-test current lows and worse. At that level, there can be rising stress for of us to attain to work because at a trudge level the negative impact on the economy and folks’s traditional livelihood turns true into a bigger negative than the disease itself,” Wood stated.

Over the previous few weeks, Covid-19 hit, stimulus buoyed markets world over possess risen conclude to a ‘bull fragment’, from time to time defined as a upward push of 20 per cent or extra from the current lows. The US, South Korea, Philippines and Indonesia possess already entered technical bull markets, having risen over 20 per cent from their respective low levels. Indian benchmarks – the S&P BSE Sensex and the Nifty 50 – are additionally flirting with this territory now. READ ABOUT IT HERE

With most international locations in a lockdown mode given how fleet Covid-19 has unfold, Wood believes it may perchance most likely perhaps presumably perhaps be now now not easy to lengthen the lockdown fragment previous this quarter given the high debt levels. This, he says, is even extra the case within the growing world than the developed since security nets are now now not the the same within the case of dilapidated to toughen the unemployed.

“It is onerous to perceive the Western world locking itself down into any other Gigantic Despair. However that threat is real if the lockdowns are extended previous this quarter thanks to the sheer stage of exceptional debt. On this admire, it is onerous to possess that the three-week lockdown in activity ordered by Indian Prime Minister Narendra Modi on March 24 may perhaps presumably perhaps additionally be extended. That’s assuming this sort of lockdown may perhaps presumably even be utilized successfully in this sort of densely populated nation,” Wood wrote.

Booster shot

On their fragment, the governments all around the globe had been providing stimulus measures to attend stem the seemingly rout precipitated by the lockdowns. In a current slouch, US Federal Reserve (US Fed) introduced a $2.3 trillion booster to attend native governments and diminutive and mid-sized companies. The slouch comes after a series of connected measures over the previous few weeks that brought key interest charges to conclude to zero. READ ABOUT IT HERE

“It may most likely perhaps presumably take care of unless Q4 earlier than we can assess how indispensable break has been done to the US economy. At this closing date, we quiz the economy to proceed to battle neatly after the lockdown has been lifted. Many companies won’t survive or gain tremendous debt burdens and loads of households will face lack of profits and employment. Whereas the present outcomes are prevailing on the 2nd, the quiz outcomes may perhaps presumably perhaps most spirited for years,” cautions Philip Marey, senior US strategist at Rabobank Global.

Oil market

Within the period in-between, a deal between Russia and Saudi Arabia on production lower and the hope that the realm economy would limp attend to normalcy within the following quarter gifts a super opportunity to take care of oil-connected stocks because the collapse in oil costs and a pick-up in economic activity can lead to a resurgence in quiz, Wood says.

“As Wuhan became reopened after 11 weeks of lockdown, there became evidence of a pickup in quiz for autos as folks consume now to now not take care of public transport. On this admire, China stays the major test case of making an are attempting to aid watch over a return to same old which is why a 2nd wave of infections there stays the most spirited threat to world markets since it may perchance most likely perhaps presumably perhaps location an ominous precedent for diversified international locations,” Wood wrote.

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