Week in a Glance: Trump and coronavirus, stimulus and Brexit

5 oct. 2020

The past week main events took place more in the political sphere than in the economic one. But they did not become less significant for the financial markets because of this. Trump's coronavirus unexpectedly hit the main focus of the past week (stimulus in the US, Brexit and statistics from the US labor market) on Friday. About this and much more in today's review.

Let's start with the main shock of the past week: Trump and his coronavirus. The news is important not even because Trump is at risk (age plus overweight), but because it means that the presidential campaign is on the verge of collapse. Recall that Trump's situation was already extremely deplorable: according to The Economist's models, Biden's chances of winning 7 out of 8, judging by the bookmaker rates, Trump loses 61 to 39. The presidential debate last week only worsened the situation for Trump, because otherwise as a shame what was happening the press has not named. In general, it is worth preparing for the new president and the corresponding changes.

But the stock markets are trying their best to put on a good face with a bad game. The expectations now are on the adoption of a new stimulus package. To be honest, expectations are overestimated. During the past week, Democrats and Republicans have tried to come to an agreement and work out a common position. But the size of the discrepancy between them is still $600-$700 billion. As a result, the Democrats could not stand it and voted their package of 2.2 billion. This act will be buried in the Senate. So, the markets are wrong. Which gives us a reason to recommend sells in the US stock market.

Statistics on the US labor market sent another clear signal in favor of sells in the stock market: the economy is clearly losing momentum in its recovery and one should not expect a quick return to pre-pandemic levels. NPP data came out worse than forecasted.

Another key event of the past week was the final (or not) round of negotiations between the UK and the EU. The results were not announced even on Friday. But on Saturday at a joint press conference, EU and UK leaders said that there is progress in negotiations. Still, there is no deal on table yet.

The upcoming week promises to be relatively calm in terms of macroeconomic statistics. But in terms of politics, everything will remain uncertain: what about Trump and the presidential race in the United States? What about stimulus? Brexit?