CW 42 AND CW 43
In a market where core fundamentals such as supply and demand, or substantial news cannot be identified as key market drivers, it is apparent that investment decisions are currently based on insubstantial headlines, and a gigantic bubble of hope towards the US equity development.
In particular, the market within the first week of October was predominantly driven by headlines: Backpedalling with the hospitalization of POTUS due to Covid-19 infection, vitalized by POTUS unexpected rapid recoverybased on unknown experimental drugs, and lastly, dethroned with the halt of US stimulus talks, leading to investors experiencing a roller coaster ride powered by volatility and fuelled by political twitter fingers.
“EMPTY BARRELS MAKE THE MOST NOISE”
Maintaining a rather bearish momentum throughout the week, granting investors a moderate direction to catch their breath, the market – recharged and reloaded – blasted off as POTUS suggested a new stimulus bill of increased value; resulting in the S&P 500 and Nasdaq indexes showcasing their best weekly performance since July 2020.
On the contrary, the USD price was weakened as chances for Biden winning the US elections in November increased by 60% in published polls.Meanwhile,the gold price was consequently back on the rise. The positive momentum in US equities was further stimulated on Pfizer and Modern, reporting scientific progress in their COVID-19 vaccine development, leading to investors making their bets on further stimulus alongside upcoming Q3 earnings.
“WHAT GOES UP MUST COME DOWN”
Depicted headline-driven behaviour based on mentioned hope and FOMO, granted a bull run for US equities.However,it appears to have lost fuel with no further updates on an eventual stimulus package.Failed Brexit talks continue to suffocate hopes over the past week. They could not be cushioned by published earnings, which in majority were able to beat analyst estimates.
The bear run continued as further dreams were crushed; Johnson & Johnson and Eli Lillyhalted their vaccine trials due to safety concerns, as adverse and unknown reactions were reported. Regardless of Pfizer releasing positive vaccine news and the US option expiry on Friday, which fundamentally is indentified as a market stimulator, enabled the DOW a 300 point upward move. The market could not establish itself until the end of the day, correcting and closing on a less spectacular down.
Reflecting on the recent days of October, we have witnessed a 1000-point jump in the DOW, a 150 point increase in the S&P 500 Indexesbased on FOMO and noise, which is not indifferent to the headlines that have enabled the market to climb during the past two months. Keeping the pullback of the past week in mind, it may be assumed that the market has found its sobriety again.Potential positive, market-stimulating news has already been priced, and consequently awaiting a correction if further stimulus relief will occur post US elections.
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