Another week will dawn upon the financial markets tomorrow. Depending on how the news is brought out, precious metals may see an even bigger rally than before.
Can the Equity Momentum Resume?
At the end of this week, the US equities market received a much-needed boost. The Dow Jones, Nasdaq, and S&P 500 all noted a solid gain. However, there is little reason to be too optimistic. After all, the values reached in June are still out of reach on the Dow Jones and S&P 500 at this time.
Considering how the US Dollar is still underperforming, it seems unlikely that equities will remain bullish. More consolidation, or even a downtrend is a more likely outcome. Combined with the lack of performance by the Japanese Yen, some volatility is to be expected.
Treasuries Remain Weak
Investing in treasuries right now is almost synonymous with throwing money out the window. Yields on lengthy Treasuries continue to diminish, making this investment vehicle even less appealing than it already was.
Given the current market sentiment, it seems unlikely that this yield will improve again. Some analysts think this is a sign of fading confidence in any economic growth in the US this year. Depending on how dire COVID-19 becomes in the next few months, that bearish outlook may prove true.
Earnings Season Needs to Deliver
The biggest side effect due to COVID-19 is how virtually all companies noted a decrease in earnings. A fair few of them were even forced to let people go or find other ways to cut costs. Second-quarter earnings for publicly traded companies are expected to be released over the coming two weeks.
Expecting anything major would be unwise, as the overall conditions don’t allow for much optimism. If the figures are extremely bad – which is possible – the stock valuations are likely to take another plunge. Volatility in the stock market will fuel demand for safe haven assets. That means that both gold and silver will likely rise in value.
ECB Rescue Package Concerns
During the COVID-19 pandemic, a lot of businesses in Europe have struggled. As several lockdown restrictions will not be lifted everywhere, this uneasy situation will continue. It is now up to the ECB to offer some form of financial aid. A 750 million euro package is on the table, yet it has not been approved yet.
Pumping more helicopter money into the European economy is not a long-term solution. In fact, it is more than likely to have a negative effect altogether. This is another catalyst to push more consumers toward precious metals, and even cryptocurrencies.
Keeping an eye on all the news next week is mandatory for anyone with open positions in traditional markets.