DOW JONES PRICE OUTLOOK: STOCK MARKET AT RISK AMID ESCALATING CHINA TENSION & ACCELERATING NEW VIRUS CASES
- Dow Jones performance for 2Q-2020 recorded a spectacular 18% rally but is still lower by about 10% year-to-date due to sharp losses notched in February and March
- USD/CNH price action has consolidated as global economic powerhouses US and China clash over the coronavirus pandemic and Hong Kong national security legislation
- US Dollar to Chinese Yuan exchange rate could serve as a bellwether to Sino-American trade tension and where the Dow Jones Industrial Average might head in 3Q-2020
Equities have exploded higher over the last three months. The Dow Jones Industrial Average, for instance, staged a remarkable 18% gain during the second quarter of 2020. Other US equity indices, like the S&P 500 and Nasdaq, led the Dow with gains even more impressive. Recent stock market upside largely follows unparalleled amounts of liquidity and stimulus provided by central banks and governments around the world.
As global officials pump up stocks and investor confidence, however, the risk of equities becoming increasingly detached from their economic fundamentals seems to have grown exponentially. Complacency has ballooned alongside the Federal Reserve balance sheet, which has widely contributed to unwavering risk appetite, and led some market participants to incorrectly believe the troubling and misleading mantra that “stocks only got up.” To be clear, stocks can, and eventually do, go down.
DJIA – DOW JONES INDUSTRIAL AVERAGE & SPOT USD/CNH PRICE CHART: DAILY TIME FRAME (MAR 2019 TO JUN 2020)
That said, rekindled