The approval of the US Senate, $ 2 trillion stimulus helped the US stock indexes mark the first two-day rally since early February. Dow Jones has managed to grow by 12%, which was its best dynamics since 1987. According to the estimates of the main economic adviser to President Larry Kudlou, taking into account the aggressive monetary expansion, the Fed, the total amount of aid the US economy suffered from the coronavirus is $ 6 trillion, or 30% of GDP . It significantly exceeds the $ 800 billion stimulus of Barack Obama in 2008. Unlike the previous crisis, the current is going to be more profound, but short-lived. Whether it is time to buy stocks?
Democrats in the Senate poupiralis, arguing that the aid package will not encourage people to go to work, but eventually agreed. $ 500 billion for the major companies, $ 350 billion for small business $ 1,200 for every American adults with low or middle income, $ 500 for each child ... Impressive support for the economy has fallen ill. At the same time Donald Trump says that the drug - worse than the disease. Social isolation will exacerbate the recession, in which victims can be greater than that of the coronavirus. US President with the improvement of the epidemiological situation in a particular state offers to go to work.
It is obvious that in the near future, investors will face a series of horrifying reports on key US macro-indicators that would support the dollar as a safe haven. The paradox is that a strong greenback worsen the already dire state of the US economy. We can only hope for a stock market rally which would indicate an improvement in global risk appetite and support the "bulls" on EUR / USD.
Dynamics of S & P 500 index and USD
Source: Trading Economics.
Yes, a two-day growth of S & P 500 at first glance looks like nothing more than a correction to the "bearish" trend. History shows that the recovery in stock markets on average took about 1.5 years. First you need to answer the question of whether the stock market bottomed after the collapse of 30-35% strength levels from record highs? JP Morgan believes that yes. The company notes that the lows of the stock indices, as a rule, recorded long before the end of the recession. The current recession, caused by a coronavirus, is unique in its nature. He will be deep but short-lived. A quarter of the recession behind us, it is time to buy shares!
And I must say that many hands are scratched. Suffice it to recall that after the 2008 capitalization increased by $ 25 trillion, while low interest rates on the bonds will contribute to the diversification of the portfolio of assets by insurance companies and pension funds. The problem, perhaps, only one - a terrible macro.
Thus, if we assume that the worst for the S & P 500 left behind, and with the help of a large-scale monetary and fiscal stimulus the Fed and the White House failed to stop the "Bears", the short-term strengthening of the dollar in response to the deplorable statistics on the US should be used for purchases EUR / USD. In the meantime, we expect the realization voiced in the previous article Target at 1.0965 and 1.098.
Source analyst LiteForex
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