Investors Skeptical of Global Stock Market Rally as Coronavirus Cases Rise

Strategic Insights -

A majority of investors in a Bank of America survey believe the current stock market rally will reverse, citing concerns over a second wave of coronavirus cases. This sentiment is echoed by Jay Powell, the US Federal Reserve chair, who warned of a protracted recovery for the US economy. The development of a vaccine is seen as crucial for a swift bounceback. Despite stimulus efforts from central banks and governments, many investors doubt the sustainability of the rally, citing a mismatch between rising stocks and dour economic data.

Key Takeaways:

  • A majority (two-thirds) of global fund managers polled in the Bank of America survey believe the current stock market rally is a "bear market rally," suggesting a strong but doomed bounce against a backdrop of dire economic data.
  • Only 10% of surveyed fund managers expect a V-shaped economic recovery from the pandemic, with most believing a vaccine is necessary for a swift rebound.
  • Investors are piling into the shares of US tech giants and gold, with a second wave of Covid-19 infections topping worry lists.
  • Permanently high unemployment is another major concern for investors.
  • The BofA survey highlighted the mismatch between rising equities and weak macroeconomic data, with potentially dire consequences for the economy.
  • A significant portion of investors doubt the sustainability of the current stock market rally, citing the disconnect between economic fundamentals and market performance.
  • The global economy and corporate earnings could be down by as much as 20% from pre-pandemic levels.

Statistics:

  • 67% of global fund managers polled by Bank of America believe the current stock market rally is a "bear market rally."
  • 10% of surveyed fund managers expect a V-shaped economic recovery from the pandemic.
  • The FTSE All-World index has risen by about a third since the pandemic began.
  • The tech-focused Nasdaq Composite is 10% positive for the year.
  • The COVID-19 pandemic resulted in a 20% drop in global economic output and corporate earnings.
  • Gold prices rose to a seven-and-a-half year high on Monday.

Sources:

  • "Majority of Investors Skeptical of Global Stock Market Rally as Coronavirus Cases Rise" by Harry Dempsey, sourced from Bloomberg.