Markets saw a strong rally in April, with the S&P 500 and Dow Jones announcing the best gains since January 1987. But this increase came after a sell-off sho‌ck in March when the Covid-19 pandemic spread globally.

Harmstone argues that the benefits are achieved when investors deny real economic damage to the global economy. "People still think that things will be back to normal or what they’ve done recently is a pretty quick recovery," he explained.

The optimism of investors has been motivated by the prospect as the authorities are gradually lifting the blockade and easing social activities. However, it was precisely because the social blockade had caused a great loss to the previous global economic activity.

“Although the level of damage is still unclear, it will be serious in the coming period, starting with many businesses having to declare bankruptcy or at least the declining business activities of companies and markets. The school may be delaying the response, ”adds Harmstone.

The important factor here is that volatility is still very high. With the markets seeing big changes in both up and down directions, fluctuations below 1% / day are less likely to occur, but instead are large fluctuations above 3%.

Limit portfolio risks

"Investors need to manage portfolio risk at a low level and maintain a defensive position while looking for value-added opportunities," Harmstone said.

“Holding a portfolio of defensive stocks will probably keep you from catching up with the entire profit when the market rallies but any sharp increase in volatility will give you a defensive stock. good profit, ”he added.

Hermstone also warned that investors face the risk of falling prices if the rally ends.