Global Stock Market Crash, Fear of Second Wave vs Short-Term Correction... Trump Blames Fed

COVID-19 Fear Spreads Amid Powell Fed Chair's Warning of Delayed Economic Recovery
Wall Street Experts Say "Short-Term Surge Followed by Correction"
Trump Claims "Fed Often Wrong," Confident in Early Economic Recovery
Mnuchin Treasury Secretary States "No Economic Shutdown Even with Second Wave"

Tourists are entering SeaWorld, a theme park located in Orlando, Florida, on the 11th. Florida is a region where COVID-19 cases have surged again following the resumption of economic activities. [Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The global stock markets, which had been steadily recovering, are once again experiencing a domino-like crash starting with the US stock market, spreading fear across the market. Although a massive crash at the level seen in March is not currently anticipated, there is growing consensus that it will be difficult to replicate the recent surge.

On Wall Street, regarding the sharp drop in the US stock market on the 11th (local time), it was described as a "correction that was bound to happen eventually." However, there is close attention on the fear caused by the possibility of a second wave of COVID-19 and the resulting delay in economic recovery, which negatively impacted the stock market.

Art Hogan, Chief Investment Strategist at National Securities, described the market plunge as a "wakeup call" in an interview with The Wall Street Journal (WSJ). He explained that the sharp rise in the market after the economic reopening served as a kind of warning to the market. He said, "It is clear that the situation is improving, but it is still not good."

The domino decline in the stock market is widely interpreted as the result of the overlap between the second wave of COVID-19 and remarks by Jerome Powell, Chair of the US Federal Reserve (Fed).

The number of COVID-19 infections in the US surpassed 2 million on the previous day, the 10th. Reports that the virus is spreading again in more than 20 states, including Florida and Arizona, were interpreted as a crisis that could shrink the economy. Additionally, the Institute for Health Metrics and Evaluation (IHME) at the University of Washington released a pessimistic forecast that the number of COVID-19 deaths in the US could reach 169,890 by October, which is about 60,000 more than the current figure.

Fed Chair Powell also warned that economic recovery would be a "long road." News before the market opened that 1.54 million people filed new unemployment claims last week, marking a 10th consecutive week of decline, was insufficient to prevent a sell-off. Altaf Qasem, Chief Investment Strategist at State Street Global Advisors Europe, cited Powell's remarks, interpreting them as emphasizing to investors that although some economic indicators seem hopeful, they are still on a long journey to recovery.

There is also an opinion that the decline on this day was more of a correction following a short-term surge rather than a concern over the resurgence of COVID-19. A Wall Street insider said, "Many experts on Wall Street do not seem to believe that the current increase in confirmed cases indicates a second wave." This analysis is based on the judgment that no serious level of infection spread that would trigger a sharp drop in stock prices was reported that day. Rather, it is seen as a situation where the stock market, having surged faster than the pace of economic recovery, was shaken significantly by minor bad news.

Donald Trump, who celebrated the Nasdaq index surpassing 10,000 points for the first time the day before, criticized Chair Powell and the Fed as the stock market fell that day. President Trump tweeted, "The Fed has often been wrong. I have seen the same numbers but have done better than them. After a good third quarter and a great fourth quarter, next year will be the best year ever." He added, "We will soon see vaccines and treatments. That is my opinion. Let's wait and see." MarketWatch reported that "President Trump vented his frustration at the Fed over the stock market decline."

Steven Mnuchin, US Treasury Secretary, also stated that even if a second wave occurs, there will be no economic shutdown again. This statement predicts that there will be no economic downturn as there will be no economic stoppage. In an interview with CNBC that day, he said, "We have realized that shutting down the economy causes more damage." Mnuchin's remarks are interpreted as expressing confidence in the quarantine and tracking capabilities secured so far. He also hinted at the possibility of agreeing on an additional economic stimulus bill, saying, "We are ready to provide more resources to support US workers."

Oil prices also plunged. On the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude oil for July delivery closed at $36.34 per barrel, down 8.2%. This was the largest drop in the past six weeks.

Safe-haven gold showed strength. On the New York Commodity Exchange, August delivery gold closed at $1,739.80 per ounce, up 1.1% ($19.10).

Meanwhile, the Organisation for Economic Co-operation and Development (OECD) announced that the real Gross Domestic Product (GDP) of G20 countries decreased by 3.4% in the first quarter of this year compared to the previous quarter, marking the largest drop since related statistics began in 1998. The OECD projected that if there is no second wave of COVID-19, the global economic growth rate this year will be -6.0%, and if there is a second wave, it will be -7.6%.

This content was produced with the assistance of AI translation services.