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Will the markets crash again?

Updated: Oct 13, 2020

We need to be careful and cautious because it seems like institutional investors did not buy the market downtrend happened last March.

There are some key areas that could give the next big disappointment to the current equity markets which is completely ignoring all the risks related to the Covid-19 pandemic. The markets think that the worst is behind us and there will be no second or third wave; markets also think that a vaccine will be available within the end of 2020. Investors are willing to believe on positive scenarios based on huge fiscal and monetary support measures.

There are certain risks we cannot ignore: The growing tensions between China and the United States, the uncertain outcome of the imminent American presidential election, the long-term consequences of this year's pandemic, and last but not least, the related risks in emerging markets like for example Brazil.

Investors must remain very cautious due to the fact that the current market sentiment has returned to a state of euphoria. History suggests that new pull backs will occur, although the exact moment remains unknown. This does not mean another period of disaster and chaos will occur. It's important just to highlight that in the past two months, the flow of news has been predominantly positive, except for the humanitarian side of this crisis. This subsequently facilitated a surprisingly positive result for the equity markets.

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