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The Short Squeeze: “The market concerns fuelling uncertainty”

Sponsored by IG
·3-min read

The ongoing global pandemic and the upcoming US election are adding extra layers of uncertainty to market fundamentals.

If you want to know what to expect from the financial markets this week, but don’t have time to sift through the news to set yourself up for the trading week ahead, plug in to The Short Squeeze podcast. Hosted by The Age’s Lucy Battersby, who is joined by IG market analyst, Kyle Rodda, it fills you in on everything you need to know about the latest in the world of financial markets.

This week, Kyle and Lucy discuss the increasing list of market concerns, which are fuelling uncertainty in the market. The good news: The market isn’t as volatile as it has been. The bad news: It’s struggling to regain the momentum it had three weeks ago when the global stock market was at an all-time high. Kyle believes there are three major concerns which are adding to the uncertainty of the market:

The US election

Market participants are positioning themselves for an increasingly risky end to 2020, and a large part of this is down to the upcoming US election, suggests Kyle. The stock market appears to be gearing up for a change in President, with implied volatility increasing around November and December. This looks to be further increased due to the heightened potential that the election result could end up being contested in the courts, bringing even more uncertainty. There’s also increasing concern that a second stimulus round from the US government, which has been in the pipeline for months now, will not pass into law before the election, leaving many people waiting indefinitely for economic help.

Other global issues

The escalating tensions between the US and China has also rattled the market. There was a belief that the election campaign would distract Trump from renewing trade hostilities with China, but this hasn’t happened, causing further uncertainty in regards to Chinese tech firms. The re-introduced risk of a hard Brexit is also unnerving the market, after UK Prime Minister Boris Johnson’s Internal Market Bill has complicated UK and EU trade-talks. Both situations are causing markets to sit back and wait before moving.

The race for a COVID-19 vaccine

As a new wave of lockdowns occur across the world, risk-taking has been put on hold in the markets, creating a new wave of uncertainty. This is compounded by the uncertainty surrounding when – or if – a vaccine for COVID-19 will be available. Biotechnical reporter Emma Koehn explains that until we have a confirmed vaccine, the economy can’t truly re-open or go back to normal, creating further hesitation in the market. At the moment there are 160 companies trying to push out a vaccine. The front runner, Oxford University’s AstraZeneca, had Stage 3 trials halted last week when one of the test patients experienced side effects. The trials are now back on, and Australia has brokered a deal to buy 30 million doses of the vaccine if it is approved. However, if this happens, it won’t be available until at least 2021, meaning markets are once again left hanging until it’s confirmed.

Produced in commercial partnership between the SMH, The Age and IG. The Short Squeeze is a podcast that fills you in with all you need to know about what's happening in the world of financial markets.

Listen or subscribe to The Short Squeeze every week.

The information above does not contain (and should not be construed as containing) personal financial or investment advice or other recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of the above information.