There is definitely a possibility of a second or third wave of cases. In my opinion however, the impact to markets will not be as bad as what we witnessed in March. No one expected covid and we were not prepared for it. Coupled with the fact that we were in the late part of the economic cycle and we saw oil prices fall to its very low, the impact on markets during March was unprecedented (this word has been used too much lol). Essentially, a reason for the large dip in markets was due to liquidity issues. Consumers and businesses were in need for cash and many liquidated their portfolios causing the sell off. Investors who are trading on leverage had margin calls and need money to top up their accounts.
Now however, with all the fiscal and monetary policies in place, the liquidity concern is less of a concern. The Fed is buying over $80bn in treasuries and $40bn in mortgages a month to really facilitate liquidity into the markets. Furthermore, the Fed is also supporting the bond markets by buying investment grade rated ETFs. As such, while the possibility of more covid cases is high, I do not think the impact on markets will be as severe as in March.
There is definitely a possibility of a second or third wave of cases. In my opinion however, the impact to markets will not be as bad as what we witnessed in March. No one expected covid and we were not prepared for it. Coupled with the fact that we were in the late part of the economic cycle and we saw oil prices fall to its very low, the impact on markets during March was unprecedented (this word has been used too much lol). Essentially, a reason for the large dip in markets was due to liquidity issues. Consumers and businesses were in need for cash and many liquidated their portfolios causing the sell off. Investors who are trading on leverage had margin calls and need money to top up their accounts.
Now however, with all the fiscal and monetary policies in place, the liquidity concern is less of a concern. The Fed is buying over $80bn in treasuries and $40bn in mortgages a month to really facilitate liquidity into the markets. Furthermore, the Fed is also supporting the bond markets by buying investment grade rated ETFs. As such, while the possibility of more covid cases is high, I do not think the impact on markets will be as severe as in March.