How much is enough?

Market Update: 24 April 2020

The European Flash PMIs came out worse than anticipated and the EU Summit didn’t agree on mutual debt financing so EUR came under pressure last night to 1.0756. It is symptomatic as it was in the GFC that the EU take their time making decisions whilst conversely the US tends to rip off the band-aid in a sometimes reckless manner. It is why US Banks recovered so well post GFC whilst EU banks continued to struggle.

But how much post pandemic stimulus do we need, given we don’t know when we’re getting out of this? Is it better to announce a bazooka policy now to create shock and awe or is it a medicine that’s best administered on a drip-feed? Probably the latter, but both the markets and consumers are sentiment driven – if there’s a perception of optimism, spending and thus growth can increase like a self-fulfilling prophecy.

This optimism can also lead to big disappointments.. like Gilead Sciences – who were said to discover the miracle vaccine a week ago.. only to be reported from some Chinese tests that it failed to improve the condition of those infected. This was though disputed by Gilead, but the risk is always to the downside when you announce an end to a pandemic.

So why wasn’t S&P and AUD dramatically lower? Oil again bounced so left everything flat.

Have a safe and happy weekend as we celebrate our armed forces tomorrow at the end of our driveway – Lest We Forget.

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