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The world stock markets of 2020, overwhelmed by the Covid-19 pandemic, have experienced episodes of confusion to finally be able to reduce losses and approach 2021 with the ambition to benefit from a resumption of growth.
Markets appeared very turbulent at the start of the year due to the first Coronavirus infections in China and signs of an economic slowdown and the collapse of Asian stock markets.
Then, in March, the feeling of approaching the end of the world sent stock markets tumbling in shock from an unprecedented and near-simultaneous foreclosure to stem the spread of the epidemic.
Vincent Goffins, strategic analyst at JP Morgan, said governments and central banks then acted quickly “to avoid a recession and bail out financial markets.”
Liquidity was plentiful, and government guarantees and short-term business plans protected paralyzed businesses in a context of declining growth.
“At the end of September, most countries, except the UK, returned to a level of growth of 95% compared to the pre-crisis level,” said Jean Sarraf Beaton, director of market research at Lexor Asset Management.
the fatal blow
But in October, the coup de grace came: the second wave of the epidemic forced Europe to reimpose restrictions which again slowed down economic movement and therefore growth.
As a result, the Eurostoxx index, which includes major European capitals, fell around 7% in October, to 22% in November, the best monthly performance in stock market history for 30 years.
This rise in the stock market coincided with the development of two effective vaccines against Covid-19, the first from Pfizer / Bionic Alliance and the second from the Moderna Group, in addition to Joe Biden’s victory in the US presidential election.
The dissipation of doubts led to an immediate change in the situation, giving a clearer outlook for 2021. The stock market could offer a “happy end” at the end of the year as the Euro Stoxx 50 recorded a decline of only 5% around mid-December since the start of the year.
“At the end of the day, there’s a lot of hype out of thin air. Markets might be able to end the year roughly in the profit and loss line in Europe, while February and March , the CAC 40 index has fallen 40% in four weeks, ”Ohana said.
Positive results for the year 2021
Despite lingering questions about long-term side effects and the duration of immunity provided by licensed vaccines, markets view 2021 as “the year of crisis exit and recovery”, driven by earnings estimates high for certain sectors, according to Françoise Cespides, equity manager at Aviva Investors France.
Investors are also taking into account the stimulus packages they plan to implement in Europe and the United States in 2021.
They assume that in a context of very high public debt, central banks will be forced to keep interest rates low, which is a favorable environment for risky assets, especially equities.
Short-term challenges
“Markets will succeed in focusing on getting back to normal in 2021 and not necessarily on short-term growth spurts,” said Biton, a cashier. “However, the start of the year could remain fragile.”
“In the first quarter of 2021, the recovery may not translate into a drop in activity in the fourth quarter in Europe”, health restrictions remaining “more frequent and stricter”.
Regarding the post-Brexit phase, “even if there is a trade agreement, there will always be a deterioration in trading conditions” between the EU and the UK, warned Cespides.
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