Over the last few days Donald Trump has seemingly been found wanting when it comes to the US government’s response to the coronavirus. Initially he dismissed it as effectively a non-event only to very quickly backtrack and announce a multibillion-dollar plan to protect the US. He has also been questioned regarding the appointment of various government officials who, in the eyes of many experts, have no relevant experience in tackling what is a unique challenge.
Markets look to governments for confidence
If you look back just a few weeks, the US stock market had fallen slightly but then there was a rebound amid suggestions that the coronavirus would not be as big a problem as had been first thought. In hindsight, this bullish and effectively incorrect stance would appear to have put back the US government’s response to the coronavirus some days/weeks. It also shows that markets do look to governments for confidence and direction especially in troubled times.
As you will have seen with many companies listed on the stock market, profit warnings/lack of confidence can have a monumental impact on a company share price and reputation. This is also replicated in real life when it comes to governments and politicians. Historically, Donald Trump’s blasé response to all potential problems did tend to prove correct in the long-term but perhaps the coronavirus is a step too far even for him?
Re-election for president
Despite Donald Trump’s flaws, and there are many, and the fact that he has the ability to polarise voters it does look as though he is still favourite for re-election. Many political experts believe that it is Donald Trump’s election to lose but history shows that he can often become overconfident, confrontational and not exactly draw in voters. After changing his stance on the coronavirus and announcing a multi-billion dollar investment, his tack has changed completely.
The potential impact on the US economy could be huge and on top of the ongoing impact of the 2008/9 financial crisis, many sectors will struggle. The longer the virus goes on the greater the potential for a hit in the pocket of investors’ right across the board, from stock markets to property. Unless he can cobble together a viable response to the coronavirus this could, just could, turn out to be the weak link in his armour.
Markets awash with confusion
At this moment in time nobody can say with any real certainty how damaging and how long the coronavirus will last. We have already seen billions upon billions of dollars wiped off stock markets around the world, governments turning to panic mode and desperate shopping trends emerging amongst consumers. As we have mentioned in one of our earlier articles, this is what the WHO referred to as “disease X”, a new virus which would sweep the world with potentially deadly consequences.
Conclusion
The fact that Donald Trump was forced to swallow his pride and announce a U-turn on his initial thoughts and policies regarding the coronavirus says everything. Akin to King Canute trying to hold back the waters it very quickly became obvious his original policy was potentially damaging and he was effectively forced to admit defeat. It is difficult to see any real upside in worldwide stock markets in the short to medium term as reports of coronavirus infections continue to grow. This is not the disease which will wipe out the human race but it is a new challenge for the pharmaceutical sector. Perhaps, the next big winner from the world of finance will be that small pharmaceutical group able to provide a vaccine?