By Tamanna Inamdar
Global profit taking led to a modest pullback but probably will not turn into a major bear market, says Geoff Dennis, Emerging Market Commentator.
Do you see this pain in the market will last for some time or is it just a blip?
It may be neither actually. I do not think it is just a blip, We are probably in a pause and a modest pullback here. But this is a very modest pullback compared to what we have seen in terms of the gains both in India and world markets recently. I do not think it is going to be a major sell off. I do not think it is going to be anything like what we had in February and March.
But there are a number of factors here that may lead to some pretty significant profit taking this week. It is a global profit taking, leading to a modest pullback but probably will not turn into a major bear market.
Is the Corona overhang and fear of a second round of lockdown very much there?
Definitely, that is one argument for the selloff on Thursday. The markets are concerned about the second wave of outbreak in Europe and the new lockdowns in France, Germany, Italy and UK. I am not downplaying that and I am not saying that you would not see this selloff go a little further. I am just saying I do not think you are going to see anything like the initial wave and the shock that we had when coronavirus originally hit in February-March. Ultimately that will be what will support the markets and prevent this turning into a 35% drop in the S&P which we had in six weeks in February-March. But it is one of the concerns for sure.
There are also concerns over the stalled recovery of the US economy. So many people are still hurting and employment claims were a big negative surprise on Thursday. There has to be another fiscal package but whether we get that before the election or not is debatable, we need that now.
There is also a great amount of uncertainty about the vaccine. J&J, Eli Lilly stopped their trials because of possible safety issues. However, I would not get that bearish because interest rates are low and where else are people going to put their money?