Economic Hardship vs. Policy Deluge
Defying the deepest global post-war recession, risk assets have continued to climb the wall of worries.
- Defying the deepest global post-war recession, risk assets have continued to climb the wall of worries.
- Flattening new cases in the advanced economies and the continued policy deluge will help to keep sentiment underpinned.
- The air is getting thin, though, with US equity markets back to autumn 2019 levels. Key risks are a second wave of infections and the fast deterioration in US/China relations.
- We stick to a pro-risk tilt concentrated in the higher quality buckets of risk assets, even as cyclical assets are showing signs of life. Keep a small long duration bias given the ‘swoosh’ recovery, disinflation and continued central bank activism.
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Market Perspectives 06/2020
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.
EUROPEAN DEFAULTS LIKELY TO STAY LOW
Since March, credit markets have retraced a large part of the Covid-related spread widening, alongside rebounding risk sentiment. Although the rally has been substantial, it has remained defensive with IG outperforming HY on a beta- adjusted basis. The main reason in our view have been concerns about rising defaults.
US: SPLIT GOVERNMENT NOT TOOTHLESS ON GROWTH
Narrow margins in several key swing states sent Democratic candidate Joe Biden to the White House. However, Republicans are more likely than not to keep the majority in the Senate, with voters in Georgia having their final say on two decisive seats on Jan. 5.