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34% of investors think COVID-19 is 'very important' for stocks: Morning Brief

Myles Udland
·Markets Reporter

Friday, September 11, 2020

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When it comes to stock prices, the Fed trumps all.

It’s been almost exactly six months since President Donald Trump declared the COVID-19 pandemic a national emergency.

The early days of the pandemic saw unprecedented shockwaves sent through financial markets.

But investors surveyed by UBS have downgraded the virus as a driver of market moves.

And instead see the Federal Reserve and Congress as by far the most important factor for the stock market going forward.

“There was overwhelming consensus that monetary and fiscal stimulus was the most important driver for markets,” said UBS strategists led by Bhanu Baweja. The firm’s survey ran from August 5-28 and gathered responses from more than 650 investors.

When it comes to what drives markets, the survey is clear — nothing matters more than the Fed. Not earnings, not a trade war, and not even a global pandemic. (Source: UBS)
When it comes to what drives markets, the survey is clear — nothing matters more than the Fed. Not earnings, not a trade war, and not even a global pandemic. (Source: UBS)

“Based on the net responses of issues considered very important against issues considered not at all important, monetary and fiscal stimulus was 2.5 times more important than the next-most-important issue – company earnings and guidance. US-China politics was the third-most-important issue. The fact that governments' mobility responses to the Covid-19 counts are now very different compared to the spring is likely the reason behind the fact that the number of virus cases is considered less important.”

And not only did COVID rank fourth among factors driving markets, but 13% of respondents said the virus is “not at all important” for financial markets.

Now for many folks following markets, the results of this survey might be but a big fat “Duh.”

Because when it comes to valuing any security, the level of interest rates is the most important factor regardless of whether you’re in an economic expansion, a depression, a recession, or a pandemic. And monetary policy sets benchmark interest rates. So that’s the whole case, open and shut. The Fed will always be top of the heap for investors.

But given that daily life in the U.S. and around the globe remains substantially disrupted by the pandemic, it may come as a surprise to those not steeped in financial markets to see COVID rank fourth among key drivers of the stock market.

A reminder not that the stock market and the economy are disconnected, but results that serve as a clear example of how the stock market’s reality is shaped. And how the market’s truths can differ from our own expectations and experiences as private citizens.

By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland

What to watch today

Economy

  • 8:30 a.m. ET: CPI, August month on month (0.3% expected, 0.6% in July)

  • 8:30 a.m. ET: CPI excluding food and energy, August month on month (0.2% expected, 0.6% in July)

  • 8:30 a.m. ET: CPI, August year on year (1.2% expected, 1.0% in July)

  • 8:30 a.m. ET: CPI excluding food and energy, August year on year (1.6% expected, 1.6% in July)

  • 8:30 a.m. ET: Real average hourly earnings, August year on year (3.7% in July)

  • 8:30 a.m. ET: Real average weekly earnings, August year on year (4.2% in July)

  • 2:00 p.m. ET: Monthly budget statement, August (-$63.0 billion in July)

Earnings

  • 7:30 a.m. ET: Kroger (KR) is expected to report adjusted earnings of 54 cents per share on revenue of $29.95 billion

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