Virus treatment news continues to underpin better market sentiment.
The US Food and Drug Administration announced it had issued emergency authorisation for a therapeutics regime to be used to treat virus patients. At the same time, the White House is considering applying an ’emergency use authorization” as early as October to fast-track a coronavirus vaccine under development at Oxford.
That would potentially see a vaccine available ahead of the US Presidential election, which could boost Trump’s polling number and provide stocks with an added boost.
The positive coverage on potential Covid-19 vaccines and treatments opens the door wide open to a rotating carousel of stocks. A vaccine and possible treatment raise hope that in the not too distant future, symptoms of Covid-19 infections may become relatively mild, like cough and runny nose caused by influenza, and possibly the vaccine could even provide a cure.
But in either outcome, the Covid-19 flu will no longer pose a significant health risk, and the economy could return to standard quicker.
Indeed, the ultimate one-stop recession plugger could be but a trip to your local clinic.
In Asia, stocks looked poised for modest gains after US stocks rose to record highs and bonds fell on signs that the Trump administration may fast-track those specific vaccines and treatments for the coronavirus.
IT stocks again outperformed the S& P500 while healthcare was the only sector to close in the red.
Big-cap tech continues to ride the towering wave of momentum. At the same time, the vaccine euphoria provides the beginner beach break wave of optimism for investors to test out market rotations for when the vaccine is in hand.
While riding the high percentage of pandemic winners, the positive healthcare news flows will offer investors the luxury to buy into and wait for the rest of the pack to play catch up over the coming months and years.
Jackson Hole in focus
The other issue this week is that bond and by proxy currency markets may need to consider is Jackson Hole. US Fed Chair Powell speaks on Thursday on the Fed’s policy framework review.
His speech is expected to codify the view of the Fed’s pivot to a soft average inflation target. With inflation running persistently below target in recent years, this shift will reinforce Powell’s dovish message that the Fed is “not even thinking about “raising rates.
But this is not likely to surprise anyone, with investors already convinced central banks would stay with “lower for longer” on interest rates.
Gold loses some shine, but long-term outlook remains supportive
The gold rally has stuttered on a combination of less dovish messaging from last week’s FOMC minutes and risk positive virus treatment news flows.
Demand between $1875 and -$1925 should remain relatively sticky with the expectation that the Fed funds rate will be low for a very long time. The Fed has made it exceedingly clear that it will continue its current easy policy well into the recovery.
The Fed is not leaving the party anytime soon as the markets further bifurcate the economy into haves and have nots and should be enough to float gold.
International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp