With eight days to go until the end of the month, November has already added about a quarter of all US Covid-19 cases since the beginning of the pandemic. The number of daily new cases is rising rapidly and the percentage of positive tests in most US States is above the recommended 5% threshold. The healthcare system is under severe stress with at least 83,000 hospitalised Covid-19 patients and the number continues to go higher.

While European cases are showing signs of leveling off, several other nations such as Russia, Japan, Canada and Turkey among many others continue to struggle with rising infections.

If the pandemic is a barometer for risk, we should have seen equities, commodities and other risk assets tumble. However, several stock indices are hovering near record highs as investors are looking through the gloom to a better future.

According to the BofA monthly survey of 190 global fund managers, cash levels in portfolios fell to 4.1%, the lowest level since January, in a clear sign of the bullish mood among investors.

Whether the vaccine rally resumes in the upcoming weeks or takes a pause remains unknown. However, a lot of the positive news is already priced in and we are yet to see the economic damage caused by the Covid-19 second or third waves. Fiscal and monetary policy should continue to play a significant role in preventing a double dip recession, and investors will monitor those policymakers’ actions very closely until we are confident the economy can run on its own without support.

Today, the market will have a chance to assess how European business activity has been impacted by the latest lockdowns. Manufacturing and services flash PMIs will be released for Germany, France and the UK. The decline is unquestionable, but it is the pace of the declines which could be of concern. A sharp drop in activity will force the ECB and possibly the BoE to provide further stimulus by year end, but without bold fiscal measures central banks will struggle to stimulate aggregate demand.

Minutes from the Federal Reserve’s last policy meeting are due on Wednesday. Investors are looking for any hints on what changes may occur to the asset purchase program in December and beyond. The Fed may increase its quantity of purchased Treasury bonds, currently at $80 billion a month, and even extend the duration of bonds bought to longer-term maturities. While this may insure that borrowing costs remain in check, again it is fiscal support that’s needed to prevent another steep decline in growth.

The next several weeks will be interesting as investors continue to navigate the path of vaccine hope and pandemic reality. However, I continue to see long term opportunities in buying the dips.