4 Major concerns that threaten the markets until the end of the year

Markets Concerns

The week is being complicated and volatile in the stock markets due to a series of aspects that concern investors and that have gained special strength in recent days. Four ‘elements’ are now pushing the indices down, four ‘problems’ with the potential to go further and which constitute serious threats to the evolution of the indices in this second part of the year.

1. The increase in Covid-19 cases is due to the Delta variant. It is a reality that the cases of coronavirus do not stop increasing in the world due to the Delta strain, more contagious, and the problems in the vaccination process due to the reluctance of some citizens to get vaccinated. In the United States, 1,000 deaths have been reached in a single day this week, a figure not seen since March. In Asia, the authorities are reimposing restrictions in the framework of their policy of ‘zero tolerance’ to cases of the virus, much stricter than in the rest of the world. Meanwhile, experts fear what may happen once the summer period ends and bad weather begins, more conducive to the spread of the virus. This week, Bloomberg published warnings from American pediatricians about the possibility that going back to school will cause a wave of children with Multisystemic Childhood Syndrome (MIS-C), a serious illness caused by Covid-19.

2. The fear of the economic slowdown due to the rebound of the virus. Directly related to the above, the other great concern right now is that the economic recovery will be truncated precisely by this expansion of the virus and the consequent re-imposition of restrictionsChina published several worse-than-expected macro data earlier in the week, which exacerbated fears since the Asian giant has been the first to recover from this pandemic and is a ‘global engine’. If China begins to falter, the global impact could be critical. The United States has also published weak data this week (retail sales), and there are already those who begin to cut forecasts for the second part of the year. Oxford Economics warned on Monday that it will revise its growth estimates for China at the end of the month for the second half and the whole of 2021.

3. Afghanistan’s ‘surprise’. The takeover of Kabul by the Taliban and the recovery of power in Afghanistan is a source of pressure and of obvious concern for the markets. The Taliban promise peace and respect for human rights, but investors don’t seem to believe it. There are many doubts about what could end up happening in the region and outside it as a consequence of what happened. Rabobank experts warned earlier in the week that “this geopolitical nightmare is almost certainly only just beginning,” and that is the prevailing feeling now.

4. The possibility that the Fed ‘moves tab’ earlier than expected. Or at least that is clear from the minutes of the last meeting, which indicates that most officials responsible for monetary policy expect to start reducing asset purchases this year. There is still a division in this regard among the members of the Fed – there are those who want to do it at the end of this year and there are those who prefer to wait for the next – but the truth is that a hypothetical withdrawal of the support of the US central bank in the midst of the panorama described more markets don’t like it at all.