Coronavirus, US election and Brexit will weigh heavily on markets in the fourth quarter

September lived up to its reputation as being a poor month for stock markets historically. The global stock market rally hit the brakes, led by sell-offs of big US technology stocks. The technology-heavy Nasdaq Composite Index entered into correction territory on September 8, after falling 10 per cent from its peak less than a week prior. More recently, the tech chills seem to have spilled into other markets, with the broad-market S&P 500 index’s brief correction on September 24 and shares sinking across Europe and Asia.

The foremost risk is a significant resurgence in Covid-19 infections as the northern hemisphere moves towards the winter season. The recent increase in caseloads across Europe is of concern; the renewed fears of lockdowns were a key reason behind last week’s equity market weakness.

France and Spain are experiencing a second wave of Covid-19 infections, with case counts per million people surpassing peak levels seen during March/April this year. The United Kingdom has also witnessed a sharp rise in infections since the start of August. In the United States, there are signs of infections picking up in the last few weeks after falling through most of August and early September.