A (TEMPORARY) COVID ‘LEG DOWN’

With the second Covid-19 wave gaining momentum in Europe, investor worries about the economic recovery are back with a vengeance.

Highlights:

  • The rise in new Covid-19 cases and renewed lockdowns across Europe are casting long shadows over the economic recovery and markets.
  • Yet much more targeted restrictions, a strong Chinese rebound and continued massive fiscal and monetary policy support will keep the second wave’s impact far more muted than in spring.
  • Amid higher risk, we trimmed our overexposure to equities further, while keeping a sizeable preference for high-grade Credit, which continues to benefit from ECB support and the hunt for yield.

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MARKET PERSPECTIVES 11/2020 - A (TEMPORARY) COVID ‘LEG DOWN’

RELATED INSIGHTS

COVID-19 FACTS & FIGURES
Pfizer and BioNTech candidate Covid-19 vaccine showed to be 95% effective in early analysis, an even better result compared to data released last week. Moderna candidate Covid-19 vaccine showed to be 94.5% effective in early trials involving 30,000 people. Switzerland announced ICU beds reached full capacity and no extra units are available. Oxford and AstraZeneca Covid-19 vaccine test results are expected by late December.
THE FED REMAINS SILENT ON CHANGES TO QE AND CALLS FOR FURTHER FISCAL STIMULUS
As widely expected, the November meeting was rather uneventful: chair Powell seized the opportunity to reiterate the strong forward guidance on rates illustrated in September and to reassure on the capability of unorthodox measures to cushion a possible downturn of the economy.
CHINA’S NEW “DUAL CIRCULATION STRATEGY”
At the end of October, China approved its “Dual Circulation Strategy” which is the new five-year economic plan (2021 – 2025). The concept has been under discussion for quite some time and President Xi highlighted it already in May. In a nutshell, the concept promotes domestic demand as the central growth engine. It foresees more independent and resilient supply chains while at the same time it intends to further opening-up the corporate sector and financial markets.