The market sell-off that came calling the past week, in the wake of President, Donald Trump, being diagnosed with COVID-19 might have presented a unique investment opportunity. After sliding by more than 1.7%, the S&P 500 bounced back to finish the day just 0.7% down.
Market Pull Back
Funds rat’s, Tom Lee, believes the market will recoup all the losses accrued on the surprise COVID-19 news as it becomes clear Trump is doing much better despite being hospitalized at Walter Reed. According to Lee, the Friday sell-off was merely a knee-jerk reaction expected to fade away as positive news come out of the naval hospital.
Trump COVID-19 diagnosis could be a catalyst to drive the markets much higher as people come to terms with the fact that the coronavirus is real. Likewise, more people who had shied away from wearing masks are expected to start wearing masks, something that should result in the rate of infection subsiding.
The stock market has come under immense pressure in recent weeks on the second wave of infections taking a toll on economic activity. A new round of restrictions has especially taken a toll on the economy as depicted by weak economic releases.
Trump recovering quickly than expected would be another major catalyst that could take the market higher. A quick recovery would validate U.S therapeutics, signaling that the deadly virus can be controlled. Such a development would indicate that the U.S is better suited to handle the pandemic better than six months ago, highly needed to bolster investment sentiments in the market.
However, it is the second round of stimulus package that is needed to bolster spending levels in the struggling economy. The Democrats and Republicans have already opened talks over an additional round of stimulus after talks stalled a few weeks back.
With the September Job’s report missing estimates by nearly 200,000, a new stimulus is highly needed to prevent the unemployment level rising further. A correction from record highs in the stock market started as soon as it became clear the Democrats and Republicans are far from reaching an agreement on a new round of stimulus.
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