In the past week, the stock markets lost a little of the positive momentum of the previous week, but ultimately managed to show a slight positive performance.
After some countries such as Switzerland or Germany have announced a slow return from the lockdown, other countries are still stuck in the corona crisis. Some virologists question whether it really makes sense to reactivate parts of society and the economy after just a few weeks. Others believe that the damage caused by the lockdown is greater than the one by the virus. In the end, the question arises whether damage means the death of people or economic losses.
In Germany, the Bundesliga plans to resume ghost games in May. Similar plans exist in Spain, where Barcelona's coach Setién has expressed harsh criticism of these plans. The soccer club Schalke 04 is already urgently dependent on the allocation of the television money on May 2 in order not to get into severe existential troubles. Adidas has already applied for billions in loans from the DAX companies because otherwise it could not survive the corona crisis. And this already after just a few weeks.
A resurgent panic-like sales wave is currently not in sight, but could occur at any time due to an overwhelming negative event such as an unexpected bankruptcy of a significant company or an unexpected rapid rise in the number of new infections.
As I already mentioned in one of my posts in the past week, the economic pressure is so great that the political aim is to return from the lockdown as quickly as possible. This has made my fear of a second wave of infection more likely. It seems to me that the strategy of a controlled epidemic is being pursued in these countries, because otherwise a month-long lockdown would cause irreparable damage to the economy. And whether a vaccine will be available at the end of this time is not even guaranteed (article by Prof. Dr. med. Dr. h.c. Paul Robert Vogt).
The famous hedge fund manager Ray Dalio even gave a gloomy economic outlook in an interview. He is not talking about an impending recession, but about a depression comparable to that of the 1930s. In addition, a long-term credit cycle would currently come to an end, which would result in a realignment of the global monetary system.
The positive scenario would be that the gradual relaxation of the lockdown is successful and does not lead to a new (critical) wave of infections. The economic damage will then also remain limited and the markets may recover.
The negative scenario would be that the gradual loosening of the lockdown leads to sharper waves of infection and maybe even to conditions such as those in Bergamo or New York. In addition to the need for a further, possibly even longer lockdown, social and political unrest cannot be ruled out. Such discussions are already taking place in a prominent position, as the article by Barcelona trainer Setién shows.
Leave a Reply.
Bertan Gueler, CFA