After the rescue. As we enter the 20H2, Covid-19 is still lurking around, and influencing our social and economic behaviours. The number of new daily cases globally is at a new high. Partly, this reflects more intensive testing. The latter now captures a broader and younger population. 


  • The aftermath of the Global Covid Crisis (GCC), marked by elevated government and non-financial corporate debt, dif-fers from that of the GFC (households and bank debt). Bigger states, interventionism, deglobalisation, QE for longer, more taxes, bond-friendly regulations etc. are all part of the post-GCC world.
  • We analyse ‘new behaviours’ in more depth in our upcoming White Paper: ‘Life after Covid: the LDI view’. They do not bode well for potential growth. The illusion of a V-shape recovery, however, will support risk sentiment over summer.
  • The autumn looks more challenging, as the pandemic might put more pressure on the health systems, the recovery flattens out and political risks rise (“blue wave” at US elections? “Bare bone” Brexit deal?)
  • Because timing market turns perfectly is so hard, we enter summer with an only moderate pro-risk bias, focused on IG Credit. We take selective credit risk: prefer hybrids, AT1 and Fallen Angels to High Yield. Expect corporate defaults to peak below the post-GFC level, but to stay high for longer, while recovery rates risk being lower.
  • We argue against short duration positions, even in the context of the V-shape illusion. Tactically, cyclical stocks are better positioned than Value, but the structural challenge is to source new Growth engines. The US dollar is set to pull back further.


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US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.
Following a monster rally in stocks last autumn, multiples are well above historical averages, but equity investors can count on lingering low yields, tighter credit spreads and increasing central banks’ balance sheets which in turn maintain low the cost of equity and the discount rate of future cash flows.
Video Outlook 2021: Repair and Despair
Watch the Outlook video with Vincent Chaigneau, Head of Research at Generali Investments