Informative document for professional investors as defined by Mifid II.
By Nina Lagron, CFA, Head of Large Cap Equities, La Française AM.
The health crisis is gradually easing in the Western world, in the United States and particularly in Europe where the situation is drastically improving. With regard to the economy, the damages caused to the private sector are evident in most segments.
However, the interventions of historic magnitude conducted by central banks and governments supported markets and enabled a significant recovery of all risky assets. The losses recorded in 2020 on the main equity indices are not comparable to those of major economic crises. This rebound is evidently supported by the inflow of liquidities, but also by the substantial decrease in interest rates in the US, and by the conviction that central banks and government will not limit the scope of their interventions to deal with the current situation and potentially upcoming corrections.
This ‘’macro’’ approach will now need to be confirmed by the real economy and constitutes, in our view, a new phase of the financial aspect of the Covid-19 crisis.
A financial crisis of historic proportions – phases I to III
Equity markets recorded their sharpest fall, with a 33.8 % drop on the € MSCI World Net TR between 19/02/2020 and 23/03/2020 .
Significant interventions by central banks helped stabilize the financial markets, which strongly recovered (most significant rebound ever observed, +43.5% on the € MSCI World Net TR between 23/03/2020 and 08/06/2020) once investors were convinced that government support packages were sufficient to save the economy.
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