Markets are in for Tough Times, Recovery Time Uncertain
The equity market dynamics are changing fast, and some of the prominent factors exerting significant influence on recovery parameters globally include the oil prices and market conditions.
Oil Market
The rapidly changing oil market situations in terms of supply and demand are manifesting in different forms. For instance, the overnight rally in the oil prices was hampered by the news of a rather sharp increase in the oil supply by OPEC. The enhanced supply softened the bullish sentiments, and hence, oil prices took the beating. This has happened despite various stimulus measures announced by the US to support its dwindling economy.
Market Scenario
The situation in the global markets is also having its share of difficulties and conundrums. The US policymakers are pinning their hopes on various stimulus measures, but these initiatives are bound to have their social and demographic implications. Experts fear that these policy measures will create a gulf between American society, leading to a more intense uprising and social unrest. The rising risk in the equity market keeps investors from making fresh investments, although hopes are high that the US relief bill will prove instrumental in taking the market along on a positive trajectory.
Commenting on the ongoing situation, James Bullard, St. Louis Federal Reserve President, opined that in case of no further Federal Open Market Committee (FOMC) stimulus, the country could probably end this year without recording a loss of any economic output. Of course, this requires spending the amount that the government has already declared and the desirable adaptation on the part of business organizations and households in the country.
Conclusion
There is no doubt that the risk assets and stock markets are bound to economic growth scenarios, and analysts agree that a stimulus package will infuse the fresh momentum in the economic recovery. It is important to note that in the present scenario of low rates, the opportunity cost associated with not betting on risky and volatile assets are higher. This leaves us to derive solace only when investors who are holding on their equity investment can hope their investment not to sink to levels that we witnessed during the pandemic.
