by Connor Darrell CFA, Assistant Vice President – Head of Investments
Markets tracked lower last week as investors began to ponder whether equity market valuations were justified after several weeks of gains. The odds of what many have referred to as a potential “V” shaped recovery look increasingly small, as many in the scientific community have continued to caution that economic activity will not be able to resume to pre-virus levels until after a vaccine is developed and globally distributed. Also weighing on investor sentiment has been the resurgence of tensions in the relationship between the United States and China. Last week, U.S. intelligence sources accused China of attempting to steal COVID-19 related research through cyberattacks. The Trump Administration has also not shied away from sharing its belief that the Chinese government acted deceitfully in covering up key details about the spread of the disease within mainland China. Trump himself has even gone so far as to say that there is a reasonable probability the origins of the virus can be traced to a laboratory in Wuhan.
The true origins of the virus are unlikely to be confirmed with certainty in the near-future, and it is possible that they are never irrefutably determined. However, the re-escalation of tensions within an already strained U.S./China relationship is a key concern moving forward for global investors. No matter the efficacy of accusatory claims made by leaders within both countries, it is clear that the emergence of the COVID-19 pandemic has fostered additional distrust between the U.S. and China that may ultimately prove to be permanent. The long-term consequences of that distrust are likely to pressure on recent globalization trends and could lead to a shift in global supply chains. In the near-term, it is likely to simply remain another potential source of volatility in markets.