There are now more Covid-19 cases in Europe than there are in the U.S., according to the World Health Organization (WHO). Strikingly, France is truly in a second wave scenario, having just reported its highest number of cases since its lockdown expired — and more than it saw during the first wave’s peak.
Why is this important? Because the European experience is likely a better analogue to the U.S. than Asia due to similar cultural and societal factors. To see why those factors matter, one need look no further than differences in Covid data between the U.S. and Taiwan or Korea.
What does this mean for investors?
Despite the recent improvement in Covid-19 here in the U.S., we’re hardly out of the woods. Absent a viable vaccine, investors can expect more of the same narrow market leadership that we’ve seen already, as companies with business models unsuited to societal restrictions become more strained.
It also means that at the broad market level, the risk dynamics for equities are likely to deteriorate heading into the fall when seasonal flu activity is expected to pick up — and don’t forget about the upcoming election in November!
Do you have a risk management plan?
From a planning perspective, advisors may want to be sure that clients most vulnerable to losses have a risk management plan in place now — not later — to potentially provide protection against market pullbacks, while still maintaining some exposure to equity market upside when possible.
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