Global Investment View April 2020
Tuesday 31 March 2020
Global Investment View
The cyclical pattern of the pandemic, or when there is some sign of an improvement on the speed of the contagion. This depends on the ‘time’ variable (extension of the crisis period) and on the mobilisation efforts (containment measures introduced in different countries). There is still a lot of uncertainty at this point. The ‘whatever is necessary’ tactics of the fiscal and monetary authorities, and whether these policies are considered credible when it comes to easing financial conditions for the corporate sector or providing adequate resources to households so the latter can endure a period of higher unemployment resulting from an economic shutdown. Markets seem to have finally understood how big and unprecedented these efforts are. The short end of the credit curve, after recent dislocations, and core bond yields, which rose since the fiscal measures were announced, discounting higher future debt. Bond yields now appear to be under control, while on the credit side there is still room for improvement. Read More
Contagion speed is key for markets to reach turning point Markets (financial cycle) are leading the economic cycle and will bottom out before the end of the coronavirus pandemic. However, they would stabilise once reassured on three points:
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As we approach year-end, markets can count on two pieces of news to propel some optimism. The first comes from the US, where the Biden victory, without a real Blue Wave, is seen by markets as the best possible outcome. A Republican, or even a 50-50 senate, would make it very hard for the new president to pass any extreme measures in terms of fiscal push, more drastic legislation or tax increases.