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The economic slump leaves strong traces

The abrupt standstill of the global economy is becoming increasingly apparent in corporate and economic data. It is also an illusion to believe that the economy will get going again at the push of a button as soon as the health crisis will have been overcome. The slump is leaving marks too deep. Despite state support, numerous bankruptcies are to be expected. The losses suffered will keep many companies busy for even longer. The rise in unemployment, in turn, will weigh on consumption.

However, the health crisis has not yet been overcome either. The coronavirus will shape the healthcare system and the global economy for months to come. Although there are growing signs in Europe that the far-reaching measures taken to prevent the further spread of the coronavirus are having an effect, there is still a long way to go. However, the focus of the coronavirus pandemic is increasingly shifting to the US, where case numbers and deaths continue to rise sharply, and to emerging markets, where the problems are only just beginning.

In countries where the disease has been successfully contained, such as China, Korea and Singapore, the risk of a new outbreak is also high. This makes it clear that even if the current wave of infection soon flattens out, there are still no signs of a "herd immunity" of the world population. Until a vaccine becomes available, governments will therefore have to resort to restrictive measures - even if these are unlikely to remain in force in the same strict form due to the massive economic consequences.

Still too early to take additional risks

The stock markets recovered at the end of the 1st quarter. The US stock market has since risen by around 18 percent, while the Swiss Market Index has risen by 15 percent. The losses since the beginning of the year have thus been significantly reduced, which is also reflected in our portfolios. However, further caution is recommended.

In view of the uncertain economic outlook, we recommend our clients to keep equities underweight in their portfolios. We also believe it is still too early to take on additional risks by buying corporate bonds. It is important to limit the risks with robust investments such as government bonds and gold in order to overcome even major crises.

We are convinced that our diversification and quality guidelines will prove effective in times of major turbulence. In order to recognize the signals of an improvement as early as possible, we will of course follow the markets closely in the coming period.