Coronavirus: Lack of leadership may lead to wave of sell-offs

On-off openings of the economy may trigger a deeper recession, followed by inadequate recovery. Markets may follow with another crash and an unconvincing comeback, according to FXStreet’s analyst Yohay Elam.

Key quotes

“Contrary to 2008-2009, leadership is lacking. That implies a slower exit from lockdowns and potentially devastating second infection waves. The international blame game and nationalism are also likely to take their economic toll as the world tries to defeat COVID-19.”

“Hopes for a bounce-back in the latter part of 2020 or during 2021 may be too optimistic. After an initial downfall, the vertical part of the letter L, the world may remain at low levels of activity.” 

“The horizontal part of the letter L is not anticipated by markets and may lead to another wave of sell-offs. As investors look forward, any signs that this pessimistic scenario has higher chances may send stocks tumbling well before the second half of 2020.”