Very insightful post! I love posts that are backed with data and charts ๐
I agree that there is a big risk of a 2nd COVID-19 infection wave, especially when large number of protesters are heading to the streets.
I also agree if there is a 2nd COVID-19 wave, it is likely going to lead to another stock market crash. However, I think the key question will be whether we will see the same level of shock in the market and if we will see a lower low. My guess is that it is not so likely that we will see the same level of shock we saw in Mar 2020.
In Feb/Mar 2020, the markets were very greedy, there were many risk-on investments and many leveraged positions. Hence, when the market crash, there was a sudden liquidity crunch which resulted in the big sell-off. Now, with the Fed, ECB, BoJ and PBoC already added so much liquidity into the system, I doubt we will see that same level of liquidity crunch. In addition, after the crash, people are a little more cautious in general. Hence, it is less likely that the market is of the same level of leverage as in Feb/Mar.
Hence, I am of the opinion that we are unlikely to see a lower low, at least not in the very near-term. If the 2nd wave of COVID-19 do happen and gain media attention, we will see a correction. But the various central banks are already prepared to act. There are many facilities that have already passed and all they have to do is to pump more money to stabilize the market.
To summarize, I think a correction is likely to happen but we won't see a lower low and the magnitude and velocity of the crash will also not be as great as what we saw in Feb/Mar. It is certainly wise to set aside a sum of money to buy on that dip ๐
Thanks for dropping by and this birllian comment @culgin