The past few days have been quite turbulent for the financial markets. More specifically, there is currently a high saturation of potential geopolitical conflicts around the world, which in turn are keeping investors on their toes. These problems are also keeping the demand for safety assets like the USD, the JPY, gold, and even silver high. Here is what developments you need to follow.
First and foremost, we need to talk about the coronavirus. The pandemic which had its first signs in December and began in truth in January is still not over. Though many of the countries that have already dealt with Covid-19 are reopening their economies (which is good for the financial markets because it means a likely recovery in fundamentals), the World Health Organization continues to warn of a possible second wave. If the transition from lockdowns and social distancing back to normality is not done carefully and slowly enough, this could start all over again and put the global economy in an even worse position.
The coronavirus also plays a role in issue number two, the potential renewal of the trade war between the United States and China. US President Donald Trump, whose administration has been heavily criticized for not handling the pandemic properly and has arguably had the worst Covid-19 breakout in the world, is playing the blame game and trying to shift all responsibility to China. Trump claims that China is at fault for the coronavirus because it did not contain it properly, and has threatened to abandon the phase-1 agreement and impose new tariffs on China as punishment.
Which brings us to topic number three, China. More specifically, there is new trouble in Hong Kong, where much of 2019 was spent in pro-democracy protests against a controversial law that would have given China more control over Hong Kong’s independent justice system. The protests were never resolved, but were scaled back in magnitude due to the pandemic and the need for social distancing. But now they are likely to erupt again in more force, as China is on its way to approve a law “on behalf” of Hong Kong that will essentially take the city-state’s independence away.
All three of these issues will continue to develop and will likely dictate the movements of the stock market. Asian markets today have already crashed due to the new Hong Kong developments, and that is just one of the many negative effects we are about to see in the future.
