Global Markets Newsletter – March 2020
March was another negative month due to the deadly Coronavirus. The US took extreme measures to stimulate the Economy with the historic announcement, that the FED will proceed with unlimited purchases of bonds, and provide the market with indefinite liquidity. At the same time, interest rates were lowered to 0.25%, while Congress approved ‘helicopter money’ up to 2tln to be given straight to citizens. Markets reacted, but death toll coupled with the fact that New York became the next epidemic center, did not lead to higher levels.
Volatility remains high, inflation and unemployment remained steady, nevertheless, February figures following the corona-effect were not priced in. In April, this data is expected to deteriorate significantly.
In Europe, markets continued to fall with minor corrections, although ECB bond purchases also reached 750bln (Bank of England up to GBP 250bln). Liquidity may be enough, but consumption and investment dropped dramatically due to the lockdown in many countries, while with curfew-imposed people are required to stay in their houses.
In Greece, the stock market dropped to a new negative record, as it hit 484 units. Bonds suffered heavy losses as well, recovering marginally at the end of the month. The benchmark 10-year government bond yield dropped to 1.58% from 2.43%.
The EUR/USD moved in favour of the Euro up to 1.14 and started falling, when the US announced measures to assist the Economy to prevent its collapse. The US dollar has since stabilized around 1.07.
Preference remains in US Equities versus European. Government bonds have marginal returns while Corporate Bonds bear higher risk for their potential return. US Equities hold 70% of the total portfolio (Tech sector holding 60%). Cash remains crucial as corrections provide buying opportunities. The key factor remains in placing buying orders, once volatility subsides, something rare nowadays.
World Equities Fund VS Major Indices (YTD)
OIL – 6months (CL1 Source: Bloomberg)
EUR/USD 1 Year (Source: Bloomberg)
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