Thoughts on the recent market recovery from COVID-19

The stock markets in the U.S. and Korea have been recovering at the unprecedented speed. So how far will the recovery go? It is evident that no one has a clue to this question – when I look at the headlines of financial section of the news, one expert says something like, ‘the worst is over, and the market will bounce back to an unprecedented level’, while another expert says something like, ‘the worst is still to come’.

I am more inclined to the latter opinion for few reasons. Other than the fact that the economy in the Main st. will be worse in the Q2, there are factors that can cause the market to panic.

First, I believe the U.S. is opening up its economy much too soon and I don’t believe that Remdesivir, a corona virus drug that is receiving the most attention in the media right now, is a safe bet. To me, the fast-track approval of this drug by FDA is extremely worrisome as the side-effects of the drug will probably not be fully known before its use – there is always a high chance of problems occuring when you rush things.

Another reason is the blame games that President Trump likes to use to get out of difficult situations. I just read today in Bloomberg News article (see below) that Trump is considering to take punitive actions. I am sure he will use his power to do so, if his approval rating falls or the market does not come back as quickly as he wishes or whatever the reasons. So the U.S. – China trade war, which is at its phase-I agreement (this was always the big issue moving the market before COVID-19), may move backwards to phase zero or even minus one.

“Trump Says China’s Virus Response Tied to Wish for Him to Lose (09:36 a.m. HK)

President Donald Trump said he thinks that China is determined to see him lose the November election based on Beijing’s response to the coronavirus outbreak.

Trump, in an Oval Office interview with Reuters published Wednesday night, did not provide evidence to bolster his assertion, but said that he was considering various ways to punish the Chinese government, which he has blamed for allowing the virus to spread across the world.

“China will do anything they can to have me lose this race,” Trump said in the interview. He did not say what punitive actions he might take, but added “There are many things I can do.””

Lastly, and I hope it will not occur, but there is a chance that the virus will mutate before a cure is developed. I don’t know how likely it is, but I have been hearing in the news that there were some young children developing symptoms that were not found before.

The market rallies these days are just irrational and it is creating more bubbles daily. When I am on transits, or in cafes, I hear so many people talking about investing in stocks. I hope that people, including myself, be rationale in this time of uncertainty and make prudent decisions.

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