Central banks have made very clear that they will do whatever it takes to prop up markets
All the largest European economies have clear and relatively aggressive plans to reopen in the coming weeks
The yuan has traded very strongly since Thursday morning, sending a reassuring signal for so many other markets ahead of U.S.-China trade talks next week
In U.S. stocks, hedge fund shorts are being squeezed and that provides a knock-on positive impulse to other equity markets
A collapse in U.S. yields is weakening the dollar and easing financial conditions globally
For U.S. jobs data later on Friday, there shouldn’t be any shock value as abysmal numbers are expected.
Ironically, the risk to markets may come from a print that’s less bad than feared, as that would see U.S. yields bounce, the curve steepen and the dollar strengthen again, thereby tightening financial conditions.
Otherwise, only two other risks seem to be left and neither work on any schedule:
a severe negative shift in virus sentiment
or an escalation in tensions between the U.S. and China
For now, the US market is in the stage of valuation restoration, from large blue-chip stocks to small and medium-sized stocks. The large IT monsters such as Amazon (AMZN.US) and Microsoft (MSFT.US), which have stable businesses and benefit from the "house economy", have been restored to relatively high valuations, while catering such as McDonald's (MCD.US) ), Wendy (WEN.US), etc. have also recovered a lot from previous slip. The oil and cruise sectors still require a lot of evidence to recover, while we believe that the current S & P index and the Dow Jones index have rebound to an ideal level. Investors should keep a close eye to their holdings and leverage levels, reduce the holding level to retain a certain amount of cash, or do sufficient hedging to prevent the coming market correction. We believed that as the US launches an unlimited QE to rescue industries and companies who are financial distressed, the opportunity of a big financial crisis caused by a broken capital chain is low. In contrast, the pattern of slow rise and sharp adjustment is to be continued. Investment Idea: Digital Real Estate Trust (DLR.US) The Digital Real Estate Trust mainly operates data center leasing, has the characteristics of light assets and low debt, stable income, and free cash flow. The current dividend yield is 2.90%, with strong defense. At present, the stock price is close to the historical high level. We believe that as the low interest rates environment continued, high dividend yield stocks are still top priority of the market, which set to provide stable cash flow for portfolios.
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