AstraZeneca Plc, Pfizer Inc., and partner BioNTech SE, as well as China’s CanSino Biologics Inc. all, have reported that their experimental shots have shown promise. Furthermore, governments worldwide have shed more than $10 trillion in crisis relief packages to sustain the uncomprehensive damages done by the virus COVID-19. The hope of going back to a normal routine combined with unprecedented spending has inflated certain financial assets excessively.
On that note, growth hormone injections put into U.S corporate junk bonds were one of the reasons for helping the S&P 500’s and Dow Jones’ incredible 50% pullback from March lows. Moreover, gold and silver prices on a 9 and 7 years high respectively, while the euro breaking a 2.5 years old bearish trend reaching September 2018 highs. Those reactions are only equivalent to the actions taken by these governments, so how will the real outcome be when all the morphine has faded away? Who will end up paying all those debts? Will the governments print more money to cover another crisis in hopes of avoiding a financial catastrophe?
According to the McKinsey & Company report on The $10 trillion rescue – “the world’s economic response to date has focused on relief. Further interventions will likely be necessary to revive aggregate demand once economies reopen if consumer and business sentiments do not fully rebound, resulting in muted spending and investment.”
In conclusion, It seems that the coronavirus has opened pandora’s box, arming governments with the right to print as much money and as many times as needed in the foreseeable future, keeping markets inflated and overvalued in the long-term, unless an erratic change occurs.
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