The strength of the equity recovery is welcome and confirmation that a solution is in hand. The significant global fiscal stimulus campaigns and reduction in borrowing will deliver a significant impulse into the economic system. Uncertainty remains over longer term policy implications but current focus should be forecast conviction economics.
Current resolutions need confirmation.
With Q2 reporting about to begin, some important conclusions will be challenged or confirmed.
Equities can be categorised for Covid impact;
the defence – companies with earnings negligibly impacted,
the midfield – cyclical companies with significant deterioration of earnings during shutdown
the attack – companies that have grown and benefited from Covid issues.
Assuming early recovery positioning opportunities are now complete, focus should be on the midfield for a recovery road map, real estate type industries need to function in full and factories must operate at normal capacity.
New technology and science trends in living have confirmed their earnings potential, but further equity gains need support from traditional industries and actual earnings. Business’s that don’t make money don’t pay back loans.
The outlook is positive, immediate obstacles are a second wave of infection and delays from politics in Europe. Risks are policy errors, derailing longer term inflation and unemployment policy targets and the unpredictability of recovery curves.
Don’t know about you, but I can still kick a football down my high street without annoying too many people. Why’s the bourse so reckless !
The US elections and China trade are significant additional risks