European markets are mostly trading higher but without a clear direction nor significant volatility on Tuesday as the “wait and see” mood continues riskier assets. The current short-term lack of directionality is partly explained by expectations investors have towards the ongoing negotiations between Republicans and Democrats in the Senate about a multi-trillion-dollar recovery plan aiming to provide more support to the US economy.
On the other hand, market optimism remains strong and alive with investors seeming to view all news as good news. Indeed, most market operators are not scared by the recent surge in coronavirus cases as it is likely to lead to a more dovish approach from the FOMC tomorrow, bringing even more support to markets. Having said that, the surge in alternative assets and safe havens (precious metals and crypto markets) is also a sign money managers have started to diversify their exposure in order to hedge their portfolios against any potential downside risk on stocks, as the US election looms and tensions with China continue to simmer.
