The new reality for investors is that we’re playing a waiting game. Market volatility will remain elevated until we have a clearer picture of the shape of the economic recovery. This is going to be a gradual process. There will be no single moment where the clouds of uncertainty lift and we know precisely what the economic trajectory will be. Each new economic data release inches us closer to understanding the shape of the post-COVID 19 economic landscape, and investors must be prepared for elevated volatility in markets to persist for some time because of this new normal.
At the end of July, for example, we will get the Q2 2020 GDP data for the United States. This was the period of most intense lockdowns in the world’s biggest economy, and we can expect the data to be negative, but nonetheless the relative strength / weakness versus expectations of this important data release will reveal more information about the true underlying economic situation we are faced with.
On the medical front, the news-flow has been positive. A major US drugs company has said that its antiviral treatment for COVID-19 (remdesivir) has “improved clinical recovery” in patients, reducing the risk of death by 62%, and some new vaccines look like they may get approval by the end of the year for large trials in humans. However, it’s way too soon to start celebrating – we have a long way to go before humanity gets on top of this virus and in the meantime, we are seeing spikes of new cases in many countries. On the medical front, we’re not out of the woods yet.
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