A first breath of fresh air

This reaction was triggered by the approval of a 2 trillion Dollar rescue programme for the US economy. In doing so, the Americans followed the example of other countries that had already passed tax relief, measures to provide liquidity and credit guarantees in recent days. These measures on the fiscal side are being flanked by extreme monetary policy interventions by central banks worldwide. Another positive is that the Covid-19 infection rates in a few countries outside China are falling. The sometimes drastic decisions taken to curb the risk of infection thus appear to be beginning to have an effect.

On the other hand, social life is frozen and the economy is slowing down considerably. This can now be seen very clearly in the economic data. For example, according to leading economic indicators, the business activity of European service companies has slumped in recent weeks more sharply than ever before. We will therefore be dealing with the corona crisis for a long time to come.

As overwhelming as the reaction of the financial markets to the US rescue package has been, the situation will not yet ease, it is too early for that. The reaction was so strong because the markets had been so badly shaken in the days before. As a reminder, it is only a week since we recorded the biggest daily loss on the US stock market in history.

By overweighting equities in our asset management mandates, we had prepared for such short-term counter moves. For all investors, it is particularly important in turbulent times not to overthrow their long-term investment strategy. In the short term, the markets will continue to fluctuate strongly, and it would be wrong to act hastily now. We must also be prepared for the fact that the market environment will remain challenging in the coming days and weeks. It is therefore essential for us to continue to diversify our portfolios.

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