Trump, Boris, and Bolsonaro Dump Markets amid Covid-19 Announcements
Local markets suffer losses amid country leaders' confirmations of COVID-19 infections, while long-term behaviour is consistent with previous trends.
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Let’s get to it.
President Trump and the First Lady confirmed positive tests to COVID-19, causing the S&P 500 to fall 0.5% and the Nasdaq more than 1% in mid-market hours.
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Daily Negative Performance across assets.
Pre-market hours hinted at daily negative performances after Trump’s Twitter announcement came in the early hours of the morning (around 6 am). As a result, Future Contracts declined while the CBOE Volatility Index jumped, reflecting investors’s fears.
Gold and Bitcoin end up negative, but with inverse price behaviour amid the announcement.
At the same time, Oil prices dumped while Gold, the prime safe-haven, initially jumped but has since come down to slightly daily negative performance. On the digital side, Bitcoin reacted very negatively amid the announcement hour but edged back even though it is still showing a daily negative performance.
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Bitcoin as the digital safe-haven proponent had an inverse behaviour to gold, but both are ending up with a negative outlook for the day, raising further questions ahead about the decoupling of digital assets from traditional markets and its safe-haven role.
Does it change medium-term market predictions?
This predictable daily correction comes at an uncertain time for markets facing a slight correction from summer highs amid civil turmoil and U.S. elections proximity.
Some analysts believe this won’t change long-term perspective while CNBC’s Jim Cramer suggests that “people should have a buy list ready.”
Let’s investigate how other markets reacted after their country leaders announced COVID-19 positive cases.
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How Brazil and the U.K markets reacted to their country leaders' positive COVID-19 tests?
On March 27, Boris Johnson, the U.K. Prime Minister, was the first of these three leaders to announce he was infected and facing medical care amid harsh quarantine measures.
The announcement came early in the morning (around 11 am), which caused the FTSE 100, an index comprised of the top 100 British companies, to start falling and causing the day to close over 5% losses.
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Even though the daily performance was negative, the U.K.'s main stock market kept its recovery, in line with global markets, until mid-Summer.
Brazil Markets also reacted negatively to Bolsonaro’s COVID-19 case.
On July 7, Brazil’s President Bolsonaro confirmed his COVID-19 positive test with mild symptoms, causing Ibovespa, the main Brazilian stock index, to close the day with 1.19% losses.
However, as we’ve seen with the U.K., the medium-term performance of the market was positive, in line with the FTSE 100, S&P 500, and precious metals (e.g., gold, silver).
Ibovespa is now facing a sight correction from record-prices since the March crash after having reached all-time highs in January 2020.
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In what direction do you think the market is going? Leave your comments below, and let’s get the discussion started.
Medium-term trends seem to continue after daily shocks
The intraday behaviour of markets amid COVID news cause investors to be pessimistic amid leadership instability, leading the market to react negatively.
However, the long-term market reaction seems to be independent of the abnormal effect seen in the day of the news, with each country reacting differently according to their market dynamics.
The COVID-19 confirmation comes at a tricky time for Trump’s campaign, causing more uncertainty around the upcoming debates and elections outcome. Markets seem to be moving accordingly to the uncertain times, showing mixed behaviour during September, raising caution for investors ahead.
Hope you liked the first edition of Past The Limbo, a bi-weekly newsletter in the intersection between Bitcoin, crypto, and traditional markets.
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