Second wave or second wind?


UBS House View

After a strong rally from the March lows, equity markets have been range-bound. Investors are weighing hopes of a recovery against fears of a “second wave” of virus cases, high valuations, and US-China trade tensions. In this letter, we offer some perspective on these worries and why changing sentiment could revive and broaden the advance in equity markets.

In our view, for markets to catch a “second wind,” investors need greater confidence that a “second wave” of virus infections will not lead to renewed lockdowns. Even if current economic conditions are weak, markets are forward-looking and would likely trade higher if investors gain confidence that a robust recovery will take hold.

Where could this confidence come from? As we have seen in recent days, news about faster-than-expected vaccine or antiviral development has the power to reduce investor anxiety. We are confident that more medical progress will be announced. Yet we are also looking closely at the way that hospitalization rates respond to looser lockdown measures.


UBS House View

Our publication "UBS House View" gives you a compact overview of UBS's opinions on the financial markets. Drawing on our global investment and research capabilities, it aims to offer you the best, most up-to-date investment guidance.