However, the stock markets appear to care less and are unconcerned with the short to medium term damage that this virus is causing to many sectors of the economy and will continue to cause for at least the next couple of months, if not longer.
(Charts via google.com)
This move higher in prices not only includes Western stock markets, but also Chinese markets, with the CSI 300 in China rising by 1.1 percent throughout Wednesday's trading session.
This move higher in the CSI 300 is largely being driven by direct intervention by the People’s Bank of China, who unsurprising are pouring billions of dollars into the markets, propping it up, while the coronavirus continues to wrack the economy as a whole due to the widespread restrictions that the country has placed on its people in an effort to stop the spread of the virus.
Many in the financial industry are taking heart with this direct intervention, as they believe that other countries will follow suite and intervene in the markets if need be as well. Likely an accurate assessment given our past history.
This intervention is playing a part in the recent rally seen in the S&P 500 and Dow Jones, however, other news is also being factored in as well, such as another softening in the trade wars between China and the United States, in which China plans on massively cutting tariffs of certain US goods entering into the country.
These cuts will affect $75 billion worth of U.S. imports including soybeans, pork and auto parts, taking the effective tariff rate from 10%, down to 5%.
However, many of the tariffs that were enacted during the ongoing trade wars of last year still remain in place and are likely to remain so until both parties can fully resolve their issues.
Additionally, the acquittal of President Trump on Wednesday has led to a reduction of risk in the markets, as fears of an upheaval have been mitigated for the time being, meaning it is business as usual for Wall St.
This has played a part in alleviating many peoples fears, as overall President Trump continues to receive favorable polling in regards to the state of the economy. In fact, Americans confidence in the economy is the highest it has been in the past two decades.
(Chart source, goldprice.org)
All of this perceived positive news had an initial effect on the price of gold and silver bullion, both of which had suffered pull backs early on in the week, only to rally once again on Thursday as people once again realized that not everything is fixed and many problems still yet remain.
The World Health Organization announcing the largest increase in cases, in any single day since the outbreak of the coronavirus began is one the risks causing people to return to safe haven assets such as gold bullion.
“We cannot defeat this outbreak without solidarity. Political solidarity, technical solidarity, and financial solidarity.”
As Mish Shedlock recently stated, there appears to be "no containment in sight".
The question that remains now, is how long can this rally in the markets continue? How long can governments around the world continue to print fiat currency, throwing it at any problem may arise?
We shall see.
