Global stock markets bottomed out last week strengthening by approximately 10-15 %. However at the end of the last week and during this week stock markets have begun to stagnate or rather slightly decline again.
Nevertheless declines were not steep, stock markets declined up to 5 % on average. The blame is nothing but new fundamental information about the global pandemic COVID19 and its impact on the world economy. It turns out that the pandemic will have a much greater impact on the dynamics of the world economy and the dynamics of corporate results such as revenues, earnings and cash flow than originally predicted two weeks ago. The global economic recession may persist until 2021. Rating agencies gradually downgrade some companies, respectively reduce their credit rating. Yet the first US company that focuses on extracting oil and gas from US shale reported bankruptcy yesterday. It turns out that with the economic recovery, including the recovery of global stock markets, it will not be as simple as investors thought two weeks ago. Certainly, the key central banks, led by the Fed and the ECB, have flooded the market with liquidity and prevented total chaos, but it is still evident that stock bulls will have to wait some time for their final victory.
Michal Stupavský
Investment Strategist Conseq Investment Management, a.s.