Dear Eoin, thank you for the excellent insights into market dynamics. There is one thing which you state from time to time - viz that you do not believe there will be a second wave of the virus in the Autumn. What leads you to believe that - we don't seem to know that much about the virus. So how can you know that there will not be a second wave in the Autumn? Although I definitely agree with you that authorities will do everything in their power to avoid more lock-downs. Many thanks, A

Eoin Treacy's view

Thank you for this question which may also be of interest to other subscribers. Coincidence does not imply causation even though as humans we are hardwired to recognize patterns. In fact, we are so desperate to make sense of inscrutable situations that our minds will latch onto anything that provides a sense of security. However, the coronavirus is the not the 1917/18 influenza.

The globally interconnected economy is reporting the coronavirus outbreak in real time versus the media lockdowns which were in effect during World War I and technology has progressed a smidgen in the last century. Additionally, by all accounts the 1917/18 influenza predominately struck down people in their prime whereas the coronavirus primarily kills elderly people with serious pre-existing conditions.

Despite these differences the clear conclusion of commentators has been to conflate the experience of the coronavirus with an event more than one hundred years ago we still only have patchy knowledge of. The fact that the 2nd wave of the influenza killed more people probably has more to do with the ravages of trench warfare and media lockdowns than any other factor. It does not have to apply to the coronavirus.

In fact, the more we learn about the coronavirus the less of a threat it poses. There is obviously a risk from its ease of transmission which can overpower the ability of healthcare systems to treat patients. However, the fact that its mortality rate is officially four times worse than the flu is considerably better than the initial estimates of forty times worse. If ever there was a reason to eat more fruit and vegetables, to exercise more and lead a healthy life style, this is it. Additionally, there is clear potential for one of the more than hundred vaccine candidates to pass muster this year.

If we are looking for new waves to overwhelm us, we had best look at government and central banks action. Japan’s trillion-dollar stimulus announced today, Europe’s efforts to rescue the southern portion of the union and impending additional balance sheet increases from the Fed are all helping to support asset prices even as the need for lockdowns ends and are unlikely to be repeated.

That was certainly a factor in the reversal of an intraday reversal on the Nasdaq-100 today.