The Covid-19’s economic damages start to be felt, we expect an unprecedented GDP contraction in Q2 in both, Europe and the US. Tentative signs of recovery in China.
The policy action in the US has been quick and massive. The ECB stepped up bond purchases and liquidity injections. A coordinated EU fiscal response lags behind.
A true market turnaround would need a peak in contagion and more clarity on fiscal policy in Europe.
The biggest concern is in the credit market, but government intervention and central banks’ buying stabilize investment grade (IG) bonds.