Q2 ending in a troublesome note – Market Analysis – June 30

By: Miguel A. Rodriguez

09:45, 14 September 2020

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Risk-aversion rules final trading hours of June

Investment flows move in contradictory directions, not only today, because of its unique feature of being the last day of exercise.

Therefore, they could justify more random movements for portfolio balance, but they have been occurring in recent weeks.

And this is an evident sample of the indecision that causes uncertainty on the future of the pandemic and, as a consequence, of the economy in general.

On the one hand, we observe how fixed-income rises in price, TNOTE10 maintains its bullish momentum in recent weeks and currently yields near the historic lows of 0.60%, in a logical reaction to massive purchases by the Federal Reserve, but also due to investor seeking refuge in a typical flight-to-quality flow.



It is a natural market movement in which a high-risk aversion predominates.

However, this contradicts the impressive bullish momentum that COPPER is experiencing, which has brought it to the levels of trading close to those before the crisis. 

That reflects the increase in demand for the primary industrial metal due to the revival of the industry in the world, and that should, therefore, serve as a boost to the stock indices. 


USA30 has reflected this enthusiasm with a bearish movement that started on June 5, and that keeps it trapped between 100 and 200-day SMAs at 24600 and 26240, without deciding to take a clear direction at the moment.


Principal investors in the market comment on the exceptional nature of this situation. Everything will depend on the duration of the pandemic, and whether or not a new lock-down will be necessary. 

There are no valuation elements that make the near future unpredictable, at least with the valuation models that market analysts, investment banks and asset managers have.

For this reason, movements that depart from the traditional coherence of the market occur, and the market acts in a choppy way.

In the short term, the main element of concern is the number of infected in the United States and the government's lack of reaction, which makes fear that new closings will occur in the future with more negative consequences for the economy.

This situation would be unlocked if the evolution of the US pandemic improved, something that would eliminate the cap that it currently has.  To keep in mind that the level of liquidity has increased exponentially and, unlike other crises, money flows abundantly.

Currencies are also trapped in directionless ranges. 

An improvement in market risk sentiment would have a direct consequence on the weakening of the US Dollar, especially against the Euro, against the Australian Dollar, and, of course, against the currencies of emerging countries.

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