AlgarveBlu
Well-Known Member
- Joined
- 21 Aug 2005
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This is from the lad who looks after our investments which has enabled me to retire at 58 on full earnings, so I think he knows what he's talking about.It's a bit of a read but give it a go. GFC is the great financial crisis of the 2008
The recovery in markets so far has been based on 2 of the 3 requirements that we need to see a full recovery. Impressed as I am with the speed of the start of this recovery without the 3rd element the rally could fall back, and lows again could be tested.
Monetary stimulus was the first request that I wanted to see and unlike the GFC, this came with ridiculous speed. Possibly this was down to Central banks realising the errors that they created when confronted with the GFC just over 11 years ago. The US cut Interest rates to zero and announced QE infinity, as much Quantitative Easing that is required plus large amounts of liquidity to ensure this doesn’t move from a Viral Crisis to a financial one. The Bank of England cuts interest rates to 0.1% and announced QE of its own. Even the ECB under Christine Lagarde finally announced QE, they didn’t feel like cutting interest rates further as they’re already negative.
Fiscal Stimulus was the second requirement needed. We’ve all seen Rishi Sunak the new Chancellor announce what he will offer Large business, Small business, employees and the self-employed. Large infrastructure spends were announced in the recent budget. The US passed a $2trillion fiscal package of their own yesterday. This takes the fiscal spend globally to deal with the coronavirus crisis to $4.5trillion, an eye watering amount of money. Europe can and should do more but the phrase “will do whatever it takes” is reassuring to hear and has been uttered by Sunak, Mnuchin, Macron and even Olaf Scholz!
The third and final element that we need to see is the core of the problem and is some good news on the medical side of things. This will ensure we see a recovery and if this does present itself the recovery will be sharp and sustainable. I’ve just listened to the CeO of Novartis echoing the optimism of Trump of the hope for hydroxychloroquine (this is a well known name and people are very hopeful of its approval, so much so that I spelt that without even checking) as an antiviral cure. Remdesivir and Regeneron are names that are also been mentioned possibly just to be used in conjunction. Some tests are saying it does prove useful and some don’t. I have faith in the medical industry and I’m sure if it does work this will be the real game changer. If it doesn’t and we have to wait for a new cure to be developed, then we could see the selling return unfortunately.
As I read it, 3 actions will halp us through this financial crisis. The first two have already happened and the markets now are poised on the medical side of things. We need a test and a cure that we can rely on. When that happens, the health of the world will become stable and the finacial markets will recover from the huge losses of the last few weeks.
That;s important to me and mrs flyer as 60 year olds relying on income from investments but above all please stay safe
Of the three points highlighted it is the third element the medical situation which the destiny of these markets will pivot around.Forget points 1 and 2 they are just in its basic form cash flow crisis management strategies for government/banking system and in turn fiscal strategy for your man on the street. They had to be administered especially the fiscal phase just to stop society descending into anarchy - big questions about how long governments can run these job bailouts.
Antiviral combination testing is the next logical step due to time lines on a vaccine but caution in terms of testing time lines on this have to be considered, don’t underestimate the logistics and time needed in trying various antiviral cocktails in a live situation with a new virus.
Your adviser concluded on the medical point - When that happens, the health of the world will become stable and the finacial markets will recover from the huge losses of the last few weeks.
I personally think that’s a massive over simplification of the situation going forward (Almost kids bedtime reading ending) which takes no consideration for many factors even on a good case scenario conclusion to this with the actions global governments have committed to already just at this stage ( early stage of pandemic).
I’m not dissing the guy at all but the situation is far more nuanced than this and the weighting to the conclusion is on point 3; point 1 and 2 is just the necessary action to administer to a patient having a heart attack just to give you a chance to tackle point 3 in the future - we are literally buying time here.
Good on him and you if he’s managed to get you to where you want to be with his investment advice, it’s a very precarious industry/job :-)