China’s Covid Lockdown Slump Isn't All Bad for Stocks
Policy makers have the ammunition to boost markets as they counter an economic slowdown.
Food distribution in locked-down Shanghai.
Photographer: Liu Jin/AFP
The lockdown in Shanghai, accompanied by media accounts of food shortages and unreported deaths, are evoking painful recollections of January 2020 and the central city of Wuhan, where Covid-19 first broke out. For investors, the memory will also include the economic stimulus that China unleashed then to fight off a recession — as well as the bull market that ensued.
That may explain why China’s main stock indexes have not sunk below their mid-March low, even as the number of Covid cases soared. Counterintuitively, since the initial outbreak in 2020, index returns were positively — not negatively — correlated with the number of cases, according to Goldman Sachs Group Inc.