Summary

Policymakers rush in as recession hits

In response to government sanctioned COVID-19 lockdowns, many economies are facing the most severe downturn since the Great Depression. Policy-makers around the world have provided extraordinary levels of monetary and fiscal stimulus in a bid to cushion the blow from this health-cum-economic crisis. There remains much uncertainty around the depth and duration of the downturn and how the global recovery will play out when it eventually arrives. One thing we can be certain of is that the decisions made today will define the next decade both economically and politically.

Global markets look for recovery
Economic-Update-June-2020-Chart@2x

Sources: IFM Investors, Bloomberg

Remarkably, equity markets have already recovered significantly off their lows. Investors seem to be pricing in every bit of good news with regard to potential virus vaccines, lifting of restrictions and higher frequency economic data and surveys seemingly ‘bottoming out’. There is also an air of not wanting to miss out on being invested in these markets because of the potential opportunity it represents to enter what were, at the start of the year, expensive markets on most valuation metrics. Investors seem to have based this confidence on the knowledge that central banks have been, in unison, doing ‘whatever it takes’ and will likely continue to do so.