Le 9 mars 2020, journée historique

À long terme, soulignons que la prime de risque sur actions se situe maintenant à son plus haut niveau des huit dernières années, ce qui augure bien pour les investisseurs dont l’horizon d’investissement se compte en années et non pas en mois.

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• Adding fuel to fire, oil prices saw their levels fall by ~25% in a single day the largest such drop since the 1991 Gulf War following the breakdown of negotiations between OPEC member countries (+Russia) prompting Saudi Arabia to engage in a price war. And finally, the race into safe havens pushed US 10-year rates to historic new lows, leading to stratospheric gains for longer-term Treasury bonds. Quite a day.
• Now, what to think of such variations? Simply put, markets are currently traversing a storm in the form of a pandemic, doing their best to push forward albeit with much reduced visibility on the near-term trajectory of the economy. As such, we should continue to see gusts in all directions sometimes downwards when bad news accumulates (as we had yesterday, March 9) and sometimes upwards when governments act (as is the case as of this writing, March 10 AM) as markets continually recalibrate their expectations in light of available information, and not always rationally. Concretely, we should also expect central banks to continue to ease monetary conditions the Federal Reserve is expected to lower its policy rate a second time next week although the effect of such measures will mostly kick in once the Coronavirus is behind us.
• When will COVID-19 storm be over? That's indeed the #1 question for markets, but none right now can answer it with any degree of certainty. On the bright side, the latest data in this regard show that the contagion in China is largely under control, while growth of new cases in other parts of the world is slowing. However, a closer look shows that some regions notably the U.S. and Europe are likely to be several days (or weeks) away from seeing their number of cases reach a plateau, assuming that the experience of ex-Hubei China can serve as a reference.
• So, what should we do in this context? In the near term, we continue to advise caution a view held since we reduced risk by bringing our equity allocation back to neutral and adding cash on February 26th. That doesn't mean investors should rush into safe havens they are already discounting a lot of bad news at these levels but the environment remains too uncertain and sentiment not sufficiently depressed to prompt us to add back risk-assets at this point.

From a long-term perspective, it should be noted that the equity risk premium is now at an 8 year high, a promising sign for investors whose investment horizon is measured in years rather than months.

Source : CIO Office, données via Refinitiv