For investors, the third quarter of 2020 was fraught with hope and uncertainty. Here’s how, according to the latest news, the financial markets are reacting to the pandemic.
Highlights
The global economy continued its slow recovery in the third quarter. Business and employment have improved, but the situation remains challenging. The stock market showed an upturn at the start of the period, but concerns about the pandemic put the brakes on the needs again. Central banks worldwide are keeping interest rates low to help the economy. ( A quarter is three months. The first quarter is from January to March, the second from April to June, the third from July to September and the fourth from October to December.)
The global response to the pandemic
The COVID-19 pandemic shook the world in the first quarter of 2020. Then there was a period of adjustment in the quarter that followed. In the third quarter, the questions intensified. People were wondering what was going to happen. Markets and the planet’s economy have followed the fluctuating conditions of each quarter.
Here’s what happened: Economies gradually reopened. The business has picked up again. China was among the first nations to curb the pandemic and move to deconfinement. Its economy has rebounded after prolonged inactivity.
Interest rates remained low in the third quarter. Central banks have tried to support the economy in these difficult times.
The US Federal Reserve has said it will let inflation rise above its 2% target. She hopes this measure will help the economy. She also says that interest rates could stay low for a while.
The UK and the European Union are still struggling to agree on a trade deal since the Brexit vote. The United States and China continue their trade negotiations.
Financial markets reflect an uncertain economy.
Stocks have been gaining in value lately in most significant markets. The economic recovery continues, and investors are regaining hope. During the pandemic, many people worked from home and shopped online. And the big winners are the companies that helped them do it.
Financial markets were strong in the third quarter. Conditions started to stabilize, so people began investing.
Canadian equities rose. Demand has increased for oil and certain metals such as gold. At the beginning of the year, people reduced their movements. Gasoline prices have gone down. But with the economic recovery, demand has picked up, and so have prices.
The price of gold often rises when times are uncertain. Same thing when the US dollar weakens against other currencies. In several countries, bond prices rose while yields fell. Markets reacted to the fact that inflation was weaker than expected.
But towards the end of the period, the markets stopped making gains. Investors were more worried about how the world will recover from the pandemic. They also feared that the US government would reduce its economic aid. The United States is one of the countries that has presented extensive spending programs. These programs were intended to limit the damage of the pandemic to the economy.
Overall, the Canadian economy has remained relatively stable
Canada’s economy took a beating in the second quarter of 2020. Household spending and business investment have never fallen so quickly. Business activity has slowed around the world. Many economies spent the bulk of the second quarter shut down.
Canada continued to reopen parts of its economy in the third quarter. The situation has improved. Economic recovery has reinvigorated the manufacturing industry. Retail businesses, too, thanks to the increase in sales.
Inflation in Canada remained low during this period. The Bank of Canada held its key rate at 0.25% for the second quarter in a row. Domestic interest rates may not go up until inflation does too. So far, inflation has remained under control in Canada.
Gasoline and food price increases slowed in the third quarter. The Bank of Canada continued to buy bonds to help the markets turn. Government assistance has been crucial in post-pandemic recovery efforts.
During the same quarter, Canada regained many lost jobs. The economic recovery has helped the labour market. More and more people are returning to work as businesses reopen. Unemployment is still worse than before the pandemic.
Economic portrait of
