The Dow Jones rallied 900 points on Wednesday after Joe Biden’s big night mixed with a global central bank stimulus effort to trigger dip-buying in the U.S. stock market.
But while Dow bulls are regaining their unbridled optimism, hedge fund billionaire Ray Dalio warns that the coronavirus outbreak could be a catastrophic risk event for financial markets.
Plugging their ears to Dalio’s dire warning, all three major U.S. stock market indices rallied aggressively on Wednesday.
In the commodity sector, crude oil climbed alongside the stock market, only to slide into the red (-0.6%) in late afternoon trading. The gold price dipped 0.17% as fear receded on Wall Street.
On the data front, robust non-farm employment data and a stellar ISM non-manufacturing PMI reading reassured investors about the resilience of the U.S. economy.
But economic stimulus may be doing more to lift the Dow Jones than the fundamentals underlying economy itself. Considerable measures of liquidity and lower interest rates are being priced in around the world.
Although economists remain skeptical about the impact that the Fed can have on the stock market, Dow bulls continue to buy the dips aggressively – aided by substantial repo actions.
The fact that Joe Biden is now a firm favorite to win the Democratic nomination is the final catalyst for the brighter mood in the stock market today.
Despite the rally in the Dow, economic forecasts continue to be downgraded, as the IMF now expects a much more severe hit from the impact of COVID-19.
Sentiment may be trending toward risk-on, but the coronavirus outbreak hasn’t stopped intensifying.
Italy has more than 3,000 cases and is joining Japan in closing its schools nationwide.
Los Angeles County – the largest U.S. county by population and GDP – declared a state of emergency after five more cases were confirmed. The nation’s wealthiest city, New York, added four more cases of its own.
While stock market bulls may be growing desensitized to the outbreak, one of the world’s wealthiest hedge fund managers, Bridgewater Chairman Ray Dalio, says that investors should be worried.
Dalio published a lengthy article outlining his belief about how serious the impact of the coronavirus will be on financial markets:
It seems to me that this is one of those once in 100 years catastrophic events that annihilates those who provide insurance against it and those who don’t take insurance to protect themselves against it because they treat it as the exposed bet that they can take because it virtually never happens.
Dalio also commented on the recent wild moves in the stock market, stating that they’re primarily the result of cash flow issues, rather than rational fundamental analysis.
A healthy day for the Dow 30 saw stocks rallying across the board, and Apple (+3.4%) worked its way back towards the $300 handle.
Fueled by a stunning performance by moderate Joe Biden on “Super Tuesday,” UnitedHealth Group leaped an astonishing 11% to $289.
According to betting market data, Medicare For All advocate Bernie Sanders has just an 18% chance to win the Democratic nomination.
Boeing stock was the only Dow component flashing losses (-0.03%). It continues to struggle because global air travel has been decimated by the effects of the coronavirus.
Last modified: June 24, 2020 1:04 AM UTC