On impossibility of "V" form, vaccine and recession in Japan

Yesterday started with an official transition of the Japanese economy to the recession stage (two consecutive quarters of decline in GDP). Moreover, a decrease of 1.9% against the previous quarter (7.3% compared to the period a year earlier) is in fact only the beginning of the problems, since it is obvious that the second quarter will be much more disastrous. So Japan joined Germany, France, Italy and other countries that, following the results of the first quarter, went into a state of economic recession.

Despite these facts the stock systemically grew, starting from the German Dax, ending with the American Nasdaq. Financial markets continue to live by the principle "the worse, the better." Since we are fans of a rational approach, we continue recommending sells in the stock markets.

This growth occurred right after the CBS interview with Fed Chairman Jerome Powell, in which he directly stated that the economy would recover for a long time - until the end of 2021. That is, there will be no V-form in the dynamics of economic recovery.

The reason for the sharp surge in optimism yesterday was a message from Moderna about the successful testing of the coronavirus vaccine. An early human trial showed that the vaccine produced antibodies against Covid-19 in all 45 participants. The news, of course, is encouraging, but it does not mean that tomorrow the vaccine will appear on the shelves (will not appear), plus its costs and possible scale of production are not clear.

But the markets continue to be optimistic and perceive the partial lifting of restrictions as a signal that the worst is behind, and a bright future awaits us all. So the news about the opening of stores in Italy, the growth of traffic in China, the opening of 25 Apple stores in the United States warns the appetite for risk.

In this light, we recommend not only sells in the stock markets, but also sell of emerging currencies: the Russian ruble, Indian rupee, Mexican peso, South African runt, Turkish lira, etc. They all, in our opinion, are excellent candidates for sales.