The virus trajectory begins to turn the corner in some major hot spots
And that is what is helping to fuel the hope in the market as we begin the new week.
The good news over the weekend is that we are seeing a possible peak in the number of deaths caused by the coronavirus and also the number of daily cases in Spain, Italy, Germany, France, New York, and New Jersey are showing signs of slowing down.
That said, there are still some worrying trends in other countries such as the UK, Japan, and Singapore to name a few. But as said earlier today, hope springs eternal.
The positive take on the coronavirus trajectory could see investors feel more optimistic in the coming sessions but I would argue that the reality of the situation is going to sink in hard once the market realises that this does not equate to any quick return to normalcy.
This is merely the first step in looking towards the possibility of returning to normalcy.
Lockdown measures in most of the countries highlighted above will surely be extended to the end of the month at the very least. As much as the curve is flattening, the case loads there are still in the thousands and that is a disconcerting fact.
Any easing of restrictions can only come when we start to see the actual numbers tail off quite drastically - or as Germany pointed out, when one infected person can statistically infect less than one other person - or else the risks of a secondary outbreak remain too high.
As such, we could be looking at tight restrictions still applying all the way through May and any real easing may only start to come around June.
While that starts to take place, social distancing and restrictions on unnecessary trips outside the house should likely still stay in place for almost everyone around the world.
Not to mention that gatherings or public/major events in most countries will still be banned all the way through until July or even August potentially.
Then there's the opening up of international borders to consider, which is something that is unlikely to happen any time soon as well. Global travel and tourism will basically be pretty much dead for the next year at the very least.
And then there's arguably the most important factor to account for, which is the change in consumer behaviour. This isn't going to be the case of a flip of the switch and the world goes back to the way it was before the virus outbreak.
Consumers are going to be more reserved and more cautious about their spending amid safety and financial pressures that are growing around the world.
There will be many businesses suffering and many people will be out of jobs, as the change in social behaviour will also extinguish the business models of many companies.
Any V-shaped recovery is out of the picture already and a U-shaped recovery largely depends on a vaccine being found, which could take take 12-18 months from now.
Otherwise, if we are going to learn to live with the virus, one can expect a recovery shaped like the Nike swoosh if anything else. And that means a prolonged period of economic stuttering and social inconvenience across the world.
I don't think the market is quite settled on that reality yet but once it does, there could be much more room to fall for stocks and risk assets in the coming weeks/months.
