Amundi Investment Talks 5

Amundi Institute, Investment Talks

Thursday, April 2nd, 11:00am (CET)

Central Banks 'bazookas' have been put in place and the size of the fiscal push under discussion in the US is also huge.  

Our Speaker:  Monica Defend - Global Head of Research

Moderator: Ernst Osinga - Head of Cross Border Marketing

Policy makers have been quick to respond but the speed of contagion is key for markets to reach a turning point

The contagion containment measures and policy response are showing some impact, but as long as the pandemic doesn’t seem to be under control, volatility will persist

How is the Covid-19 situation evolving in Europe? How should investors navigate this uncertain phase?


 Key Take-Aways

On the right path - The pandemic situation seems to be improving in Italy as death rates are easing and growth in new cases is moderating, which is an indication of some success of containment measures. However, that cannot be said for the US, the UK and Germany yet. In Asia, a deep dive into the recent PMI data in China signals weak exports and imports, but there are signs of recovery on the country’s supply side. The positive news flow around oil also provided a much-needed boost to prices.

 Policy response and debates - The Fed and the ECB have been successful in providing liquidity to the markets and stabilising sovereign bond yields. In the US, the latest fiscal package (of around 10% of the GDP) appears to be strong, but its effectiveness depends on how new cases evolve and how the economy reacts. In Europe, the ECB has been quick to respond on the monetary side with its asset purchase. However, there is still a debate on coronabonds, how to design them and the associated moral hazards. If issued, they would represent an ideological and political step toward further economic integration.

Quality should be the name of the game across asset classes - While investment grade credit in the US and Europe is part of the central banks’ support umbrella, we suggest investors to look at companies that have strong balance sheet liquidity and cash flows to face the economic lockdown. Selective opportunities also exist in equities, but investors should focus on robust business models in defensive sectors, given that volatility is likely to persist. It is also important to stay vigilant and continue to evaluate upcoming data to get a sense of the economic slowdown.

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