“The financial picture is evolving rapidly and will continue to do so in the coming months. On the one hand there has been an attenuation of some favorable factors, on the other the arrival of new difficulties. But overall, the market situation and the reactions of policymakers lead us to say that it is better to keep investments, favoring growth sectors and high technology”. She says it Alessandro Fugnoli, Kairos strategist, in the latest podcast of his monthly column “On the fourth floor".
First of all, Fugnoli identifies three factors: “The back question, which triggered the rebound in the global economy, is slowing down somewhat. Furthermore, the replenishment of inventories by companies, which contributed to the recovery of production activity, is also slightly slowing down. In the end, consumer assistance measures, subsidies, are fading a bit, particularly in the United States”.
As far as the difficulties are concerned, Fugnoli underlines that “that the new acceleration of infections in many parts of the world it is likely to continue as we approach the winter months.”
However, there are also some favorable elements on the markets, for example "the big cleaning done in September, especially as regards the excess of upward positions on the Stock Exchange, moreover in highly speculated sectors such as high technology – continues the analyst – In the second part of the month we instead witnessed a reduction in short positions”.
In these conditions, according to Fugnoli, the market started the month of October "ready to resume, in a calmer and more solid way, the recovery started in March-April, after the collapse due to the pandemic”.
The second positive factor concerns the American political elections: “While previously we thought about an eventual election of Biden looking at the half-empty glass of the taxes that it will surely impose between the end of 2021 and the beginning of 2022 - explains the Kairos strategist - now we look at the half-full glass, i.e. at the fact that under a possible democratic administration public spending would be greatly increased, managing not only to offset the tax increase, but also to produce a net effect on the economy”.
In the meantime, the experiments on the vaccines, "which will probably arrive in the second quarter of 2021 - underlines Fugnoli again - also helping the markets to overcome months that will probably be more difficult than the ones we are experiencing now from the point of view of the pandemic".
Finally, monetary and fiscal policy measures: "In December the ECB will certainly increase Quantitative easing - concludes Fugnoli - while the governments, starting with the German one, could launch new expansionary measures to deal with any lockdowns".
