Print the page
Increase font size

Is a New Strain of COVID Infecting the Markets?

Graham Summers

Posted December 21, 2020

Graham Summers

Stocks are a sea of red this morning based on news of a new strain of COVID-19 in the UK.

Stocks were already due for a pullback of sorts. They had been on a tear since early November when they broke out of a three-month consolidation range (red box in the chart below).

mncchart1

The issue now is determining whether this drop is just a brief dip, or the start of something larger.

The bullish case is that fund managers are performing terribly this year, and will be eager to juice their holdings higher to finish the year with the highest possible returns.

The bearish case is that with a new strain of COVID-19 appearing in the UK, investors will be terrified of another round of economic lockdowns.

The One Thing That Is Certain

Will the “Santa rally” continue or will COVID-19 once again shutter the global economy? Who knows?

The one thing that IS clear is that policymakers will respond to this new strain of COVID-19 the same way they responded to the first: by printing more money.

Consider that from 2008-2016, the Fed printed some $3 trillion to combat the Great Financial Crisis and its aftermath.

To combat the economic fallout from COVID-19, the Fed printed that same amount of money in seven months this year alone.

The Fed is not alone here. Globally, between central banks interventions and government stimulus, policymakers have devoted a jaw-dropping $15 trillion this year to COVID relief.

This is going to unleash an inflationary storm the likes of which we’ve not seen in decades.

And the markets know it.

Gold has exploded higher in $USD, Euros, and Yen. They recently dipped lower on hopes that a vaccine would fix the COVID-19 situation. But with the appearance of a new strain of the virus threatening more shutdowns, we can expect a new round of money printing, which will ignite a run in gold to new all-time highs.

mncchart2

Best Regards,

Graham Summers
Editor, Money & Crisis

What’s Driving this Shift in the Stock Market?

Posted January 22, 2021

The real reason money is rotating out of the tech sector…

A Critical Shift in the Stock Market

Posted January 21, 2021

By Graham Summers

Market leadership has changed from last year. Here’s what you need to know…

Another Case for the Coming Inflationary Storm

Posted January 20, 2021

By Graham Summers

Policymakers have proven it time and again, and it’s only going to get worse…

Joe Biden’s MAJOR Problem

Posted January 19, 2021

By Graham Summers

The President-elect has a serious financial issue to deal with, and his policies suggest he doesn’t know or care…

The Simple Economics of What’s Headed Our Way

Posted January 15, 2021

By Graham Summers

Literal fortunes can be made once the dollar begins to collapse…

The Fed Monetary Policy is Crazy! (But Not Unprecedented)

Posted January 14, 2021

By Graham Summers

Here’s what we can learn from the Bank of Japan…