“The trend is your friend”, is a very old and well-known motto of the market and more importantly this is a viable reality because when it is fulfilled by the investor it puts it above their perceptions, which for the market progress even little or nothing matters since in the end, it is not the definition of common sense that governs the investor who rules the market, it is the other way around. This is indeed one of the main teachings and achievements of any aspiring trader, letting go of their stubbornness and assume that it will never be stronger than the market and therefore should rather take advantage of the waves that the market offers and “surf” in them, never against, because this will inevitably result in discomfort since we can even have a correct idea, but the timing is the key to success in trading, and timing is something over which the investor has no control, for example, I may even have all the fundamental reason on my side, but until the value of the asset follows in order to correct for that value a lot will happen and probably against the fundamentals so that going with the flow is one of the sacred principles of the business.
This motto adapted to the current situation means that we must take into account that the enormous liquidity in the system creates a supportive hand that is unlikely to allow significant corrections. This places another premise, meaning that investors will hold on to all possibilities of optimism to continue pushing the indexes to new historical highs. One of those searches for optimism is the so-called “blue wave”, an increasingly feasible probability given the leadership that Joe Biden has in the polls in relation to President Trump, which could remove the possibility of a litigation period after the elections between Democrats and Republicans if the victory is beyond doubt. In addition, as the stimulus package presented by the Democrats, the blue side, is substantially more generous than that of the Republicans, this will mean more oxygen for an economy that shows signs of weakness, namely in the labour market.
This oxygen that the bulls will certainly use to continue to dominate the reins of the market, leaving for later the consequences of the mountain of debt that is being generated with the economic response to COVID-19.
