by David Picton and Team, Picton Mahoney Asset Management
As the world continues to grapple with the COVID-19 pandemic, it appears that aggressive monetary and fiscal stimulus measures have worked to help mend the economy and capital markets. A “warp speed” risk asset drawdown in the first quarter has been followed by a much more powerful-than-expected recovery. Economic data are now accelerating back, following record deterioration. The initial steps taken by policy-makers have been up to the task, ensuring market liquidity and ample stimulus to bridge the shutdown gap. However, the question will now shift to not just how quickly economies can reopen but how effective any plans to do so can be without risking a serious new spike in case counts that undermines all the best-laid plans to date. We remain positive on risk assets, but suggest markets may be overbought and that appropriate hedges should be considered in the near term, given the lack of a cohesive national plan for reopening in the all-important U.S. economy.
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