Investors May Breathe a Sigh of Relief This Afternoon

Looking at the markets today, it may be that many investors will breathe a sigh of relief this afternoon. As the week winds down, it’s worth considering that recent events have provided us with reminders of some harsh realities.

AstraZeneca’s announcement that it is halting trials of its vaccine following a volunteer’s illness underlines the good-news-bad -news of investing in ‘hot’ sectors, in this case the pharma sector. The announcement led to drops in AstraZeneca shares as well as those of some other pharma companies. That followed the heart-wrenching rout in tech shares, another hot sector.

We also need to consider other harsh realities. Perhaps Tiff Macklem, the new Governor of the Bank of Canada, described it best when he said, “We’re in a deep hole and it’s going to be a long way out of this hole”. He made the remark while underlining the BOC’s focus on monetary stimulus and low interest rates. His remarks can be applied to other countries.

Connected to that is the huge debt being racked up through government relief programs in many countries. The mounting debt is an incentive for governments to keep interest rates low (thus keeping down their own borrowing costs) but on the other hand there is still a mounting bill to be paid, somewhere down the line.

Related: Can Today's Markets Continue To Recover From the Tech Rout?