(25 March 2020)DAILY MARKET BRIEF 2:To assess how well the market recovers

To assess how well the market recovers, we will be closely monitoring two things: the price volatility and the US dollar inflows.
First, a 5%-10% daily volatility is bad, regardless of its direction. A 10% jump in asset prices is as worrying as a 10% fall. Therefore, a stabilization of market prices near a 1-3% daily range is necessary to restore the investor confidence in the short to medium term.
Then, the slowdown in US dollar purchases should be a positive hint that the fund liquidations are slowing and investors start bringing the pile of cash they are currently sitting on back to the market.

It is worth noting that we still have very little visibility on what may happen in the weeks and months to come. With an almost certain worldwide recession looming, the virus-infected economic data will sour the mood practically on daily basis for at least the first half of the year. In this respect, the preliminary PMI figures released yesterday were cataclysmic for most economies in March, with the services sector which accounts for an overwhelming majority of the developed economies taking an unprecedented hit due to a complete shutdown of activity.

But in the long-term, the equity markets have always recovered from the harshest shocks and came out stronger, at least in terms of pricing, following financial crisis.

By Ipek Ozkardeskaya