Slight Wall Street Recovery After Monday’s Sell-Off

Slight Wall Street Recovery After Monday’s Sell-Off

Due to increased Covid-related infections, market sentiment has decreased as global outlook worsens. Over the weekend, cases throughout the U.S. continued to rise, while financials are on the front burner as third-quarter earnings are about to be announced. As Monday loomed, it was clear that overall market sentiment had shifted. Due to a number of unknown factors, investors are struggling to grasp the upcoming election, and less-than-promising macroeconomic climate. However, there is light at the end of the tunnel.

Causes of Monday’s Sell-Off

For one, the resurgence of Covid-19 cases has certainly dimmed hopes that the worst has passed . With cases on the rise, it is unclear how the government will respond. Looking outward, various countries in Europe are reverting back to stricter regulations, in an effort to curb a second wave. This does not necessarily bode well for markets, as stricter regulations will lead to more economic hardship.

A second factor that led to Monday’s sell-off is the absence of an economic stimulus package – one that has been talked about with much eagerness. Without a federal stimulus package materializing, an increase in cases might just be enough to ensure a “double dip” of the U.S. recession. It is difficult to fathom what another lockdown might do to individuals and businesses alike. These uncertainties did not sit well with investors and economic decision-makers on Monday – meaning markets bore the brunt of this.

Reasons to Stay Positive

Although Monday’s sell-off was highly unsettling, a new dawn has given us reason to stay positive. The state is now engaging in discussions of releasing the much-spoken about stimulus package. As the economy continues to hurtle towards an inescapable recession which will have a long-lasting impact on the economy at large, policymakers have been urged into action.

The Fed has announced that it will enact its emergency lending powers, so as not to leave private households and SMEs out in the cold. The ability of the Fed to keep credit flowing to the general public was enough to improve shares not only in the States, but in Europe too. It must be noted that the actions of the Federal Reserve Bank will not be enough to rebalance the scales completely. However, a slight improvement on Wall Street is reason to breathe a sigh of relief.

What Next?

As the economy grapples with the effects of the pandemic, one thing is clear – businesses are more resilient than they were in the past. Certain parts of the economy are bouncing back from the initial shocks felt from economic disruption at a national level. As vital sectors continue to come to terms with the new ways of doing business, it has instilled a sense of assurance on Wall Street. Shares have bounced back amid this revelation and – coupled with an economic relief package – Wall Street might just be able to shrug off Monday’s massive decline.

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