Multi-asset volatility continues: IG Group shares opinion on stock rally
Sensationalist news about unsubstantiated matters creates rallies. Stablility and growth creates prosperity but a lack of volatility. Will the smart traders sell their big pharma stock now, capitalize, then buy it back when the world wakes up and realizes its been conned.
Stock trading has always been a speculative business, even in the old days of analog dealing and open outcry pits.
Those with good intuition, able to separate the political bluster from the probable, have always been the ones to master that particular type of trading.
These days, with volatility returning to the major currency market and to the Western stock markets after decades of steady pricing and gentle movement, traders are knuckling down and volumes are higher than they have been for a very long time.
Knee-jerk responses to news during this extremely unusual year, along with continual brainwashing from governments that entire populaces must be locked up, fear mongering and sudden revelations of a few miraculous vaccinations which may be foist upon the public en masse in record time and without proper testing have resulted in massive fluctuations in major currencies, and in the stocks of the pharmaceutical companies that make these claims about a vaccine against the most politicized ‘health’ issue in history.
The whole dynamic is new to the financial markets economy worldwide, as never in history has there been a global government controlled attempt to suppress billions of people and decimate economies such as this.
Tabloid newspapers with sensationalist headlines stating that Pfizer and Moderna have unveiled some unknown quantities that are likely to be bought by governments worldwide with taxpayers money and possibly enforced by law onto as many of us who cannot run away in time has understandably caused the stock markets – most big pharma being publicly listed – to rally tremendously.
This morning, the Dow Jones and FTSE 100 indices surged. In the US, the Dow Jones Industrial Average hit a new high, after jumping about 1.6%. The wider S&P 500 increased almost 1.2% from Friday’s record and the Nasdaq gained 0.8%.
Earlier, the UK’s FTSE 100 share index closed about 1.6% higher, while the main market in Paris rose 1.7% and in Germany shares gained 0.5%.
Interim data from the US firm Moderna suggests its vaccine is highly effective in preventing people getting ill (of course it does!) and works across all age groups. The news pushed Moderna shares more than 9% higher and the Dow to a record.
Last week, stock markets enjoyed one of their best ever days when a vaccine by Pfizer/BioNTech raised hopes that the business world might return to normal next year. A number of other vaccines are also being developed.
The gains spurred by Moderna’s news on Monday were more muted but still helped the MSCI World Index of global shares to rise further, climbing to a new record high.
Firms that have been hit most badly in the pandemic have seen the biggest rises. In the travel sector, cruise line Carnival jumped more than 10%, while Intercontinental Hotels closed almost 5% higher.
The prospect of an end to some lockdowns also helped oil prices strengthen. Brent and West Texas Intermediate crude prices were up about 3%, and shares in energy companies also gained.
Today, Chris Beauchamp, Chief Market Analyst at IG Group made his position clear on this matter by stating: “European markets have trimmed recent gains, edging into the red this morning, with the FTSE 100 suffering most with a 30 point loss.
“The rally has stalled across Europe, pausing for breath after the huge gains of the past week that have been driven by positive vaccine news. Overall the atmosphere is still positive but as the euphoria about possible routes out of the crisis begins to fade the focus will shift, to a degree at least, to the manufacture and distribution of the vaccines.”
“Neither of these things is likely any time soon, leaving investors to worry how much further the second wave will spread and how bad things could actually get over the course of the winter” said Mr Beauchamp.
“Nonetheless, risk appetite appears well-supported from here, seasonality, inflows and sentiment all providing a foundation for further gains into the end of the year. The main debate will focus on whether value stocks have truly seen a resurgence, or whether, once again, this unloved sector of the market is just enjoying a brief recovery before investor enthusiasm for tech stocks and other high-growth names returns” he said.
“EasyJet shares have taken the news of its first annual loss quite well, all things considering, and have managed to get over the warning about reduced capacity for Q1 2021 too. After a 53% gain for the month so far the stock might be considered vulnerable to some downside via profit-taking, but it looks like investors are prepared to stick this one out for now, hoping perhaps that Q2 and Q3 will see a big recovery as the vaccine news filters through to consumers” concluded Mr Beauchamp.
Those selling now can rest easy, take their profits at a time when most of the world’s population is losing its shirt against its will, and then buy them back when this whole thing is exposed for what it really is.