S&P 500: Next Crash Knocks At The Door

One more attempt by bulls on May 3 to push the S&P 500 futures to test the recent lifetime high once again seems only futile in the absence of a supportive economic scenario. The growing severe pandemic impact has disrupted the global supply chain. European equity markets are also under the grip of worsening global economic inter-dependence and still trying to sustain amid growing fear of the sudden advent of recessionary conditions.

Undoubtedly, Covid-19 has given birth to a new breed of traders in global equity markets. This breed of investors appeared due to growing lockdowns globally to disrupt infection-chain from one person to other. These investors are a novice in the world of trading. Most of them have no basic knowledge about the fundaments of equity markets. They have only one mindset towards equity markets that this is the place for earning easy money. This attitude continuously compels them to buy every dip that results in overstretching valuations of global equity markets.

Despite overstretched valuations, S&P 500 futures still find support on every sharp dip from such heights. But this never means that the current situation can avoid the next equity crash for a long time. The debt-ridden Asian countries will have to go through this pandemic for a longer duration to return to a speedy economic recovery in 2021. Stimulus can't revive the economy of one country for a longer time. It is only an attempt to provide a bit of support to the citizen to escape immediate problems caused by job loses or recurring incomes.

Countries like India, Bangladesh, and Pakistan have been struggling with a scary situation full of challenges including the absence of abundant vaccines and oxygen for infected people. Economic recovery seems to be on the back foot in these countries because the fear of escaping death has caught immediate attention. But the equity markets are also at lifetime heights in these countries. And the reason behind the wobbling at such height is the same. The same breed of Covid-generated investors are providing a base to equity markets in these countries too.

The next equity crash could be more disastrous than ever before because this will generate higher tremors than all previous market crashes. Covid-19 has overridden the global economy not only at the micro-level but at the macro level too. All the prevailing conditions could result in a chain reaction. Covid patients feel difficulty breathing after suffering from this pandemic while the equity markets are at their lifetime high. But, the bulls are also under threat after reaching lifetime highs. The current situation looks overheated which may compel bulls to run down from these heights immediately.

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