Markets likely to fall further before recovery – a test for long term investors?

The markets are predicted to remain bearish this week as news on the Coronavirus continues to remain negative. The media have generated fear about the virus resulting in goods such as hand sanitiser and face masks being cleared off the shelves in every shopping centre. This fear has now infected the Global Markets with major indexes facing a sell-off which has had a snowball effect on most stocks in the ASX. After closely watching the markets last week, it became apparent that this was going to the effect the market a lot longer than people initially predicted. The Dow Jones did have days when it recovered however the constant media pressure forced investors to remain on the sideline until the situation begins to settle.

US 10 year Treasury Bonds falls to 0.7%

The 10 year Treasury Bond yield is one of the best indicators of investor confidence. The 10 year Treasury Bond is considered one of the safest investment options when the markets begin to enter turbulence/downturn. The high demand currently for these Bonds have pushed the Bond Yields down, showing that many investors are choosing to buy into US Government debt as security. This occurs when the Bonds are trading at a premium (high demand), driving the YTM down and pushing the price up. Yahoo Finance covered this story on Treasury Bonds, something that may help you understand bonds if you are not familiar with them.

Weekly Outlook

Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.

With the current market environment it would be pointless to try predict the week ahead, instead we will look into recent news impacting investor confidence and look into when the markets are likely to recover. In todays news, Northern Italy is quarantining over 16 million people due to concerns over the virus spreading rapidly. This news came over the weekend and is yet to play out on the markets come Monday. With many schools and businesses closed globally, it poses the risk of a global recession. The Governments ability to contain the virus, but yet stimulate the economy at the same time will be the key to staying afloat in the next 6 months. Until there are breakthroughs this summer (USA summer) with animal testing it is likely that the markets will only begin to bounce back once the virus becomes contained. We could be looking at a few weeks before any substantial ground is made back.

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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

Written by Tyger Fitzpatrick, Founder of Youth Investment Group.



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