Market outlook - Have we reached a ceasefire?

From ‘-Muzzammils Desk’

Markets are no different than retail business (starts promotion/sales at the peak of the season). It peaks before growth peaks and reaches the bottom before growth touches trough. It plays and lives in the future expectations.

On the face, the market is overlooking all the policy responses by Global Central Banks and busy shopping sanitizers, toilet rolls & bottled water. The dashboard of Coronavirus has overtaken stock market scorecards because everyone is more concerned about their life expectancy than their wealth meter. Why is it so?

Because people have faith in redeeming support from State which has been ensured by their Presidents & Central Banks on the backdrop of Coronavirus. It’s natural that when you have insurance, you are never worried about hospital bills.

So Federal Reserve & other global banks' policy response has worked in a way winning people’s confidence that their Bankruptcy probability has diminished. But why has it failed to lift market morals?

The market is waiting to know how the end will achieve. Almost all countries are converging to China lockdown mode to ensure social distancing. Europe & the US have done it today. The Middle East & Far East countries have announced steps to quarantine the virus. Already the light at the end of the tunnel is going to lit up and little evidence is already visible. Canadian and Mexican markets closed positive despite US penciled history of losing 12% in a single day. Can we assume that today’s US equities caught up what other global markets have discounted on last Friday? The answer would be cautious yes. Because if you see Dow futures also closed notch higher than Dow. Nikkie & FTSE closed only -2.46% & 4.01% respectively.

What’s happening in Pakistan?

The market was initially made hostage by oil war and later panic across the world due to Coronavirus. People were and are least interested in Corona but love to discuss how other countries are defeating corona. In our view, the market is missing top leadership (Imran Khan) & it’s finance minister policy response to the crisis.

Given we are in the IMF program, our finance team took permission from IMF to roll a comprehensive package. All eyes on it as the market will not satisfy with just monetary easing. Within 18 hours, all emergency policy response will come forward and this may stem a further decline. But, decoupling from Global markets is next to zero. Let’s hope sense prevails.

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