The first half is over
Luca Tobagi. Investment Strategist
2020 has been a complicated year so far, for investors and – unfortunately - for everyone else as well. Here are a few thoughts halfway through.
We’ll remember the first six months of 2020 for a long time. Or maybe we just think we will. After all, history teaches us that human beings almost always have a short memory, even when they face events of enormous importance and magnitude. However, there is a kind of unforgettable symmetry in what happened to the markets in the first and second quarter: The COVID-19 pandemic, which began in China in late January and was formally declared a pandemic by the World Health Organization in March, effectively split the semester in half: a first quarter of collapses, concentrated mainly between the end of February and the middle of March, and a second quarter of powerful rebounds, which even led the shockproof Nasdaq to new historical highs.
The main questions we face today arise from the stark contrast between the strong rebound of equity markets and the fact that the global economy has entered a phase of weakness — let’s be plain: recession — in many countries. Are we witnessing an irrational optimism of financial markets? Or are markets correctly anticipating a very vigorous recovery? Can the unprecedented amount of monetary and fiscal stimulus have a positive effect on financial markets, quite independently of what happens to the underlying real economy?
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