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LCP Investment Summary - February 2020
Posted on 3 March, 2020 by Administrator
Global equity markets fell 7.6% (in € terms) in February, ending the month with the worst week for investors since 2008. Markets were down by well over 10% from their mid-month highs to the end of February. Markets had hit record highs by mid-month buoyed by positive global economic data, reduced fears of the coronavirus (COVID-19) and company earnings beating estimates, led by the large technology stocks.
However, investors panicked during the last week of the month as COVID-19 started to spread outside of China, to Italy and South Korea in particular, and as the implications for both global economic growth and company earnings really started to hit home, not to mention the possible large rise in fatalities. On the back of this panic, investors also began to reassess other potential areas of concern like further possible trade war issues, expensive equity valuations and the emergence of Bernie Sanders as the leading Democratic nomination for the U.S. Presidential race.
Longer-dated eurozone bond prices rose 3.6% over the month, with the yield on the AAA Eurozone 15+ Year Index falling to -0.25% by month-end. The Euro Broad Sovereign 10+ Year Index rose by 1.3% with its yield falling to 0.49%. After rising by mid-month, longer-dated Eurozone bond yields fell sharply as investors looked to these bonds as a ‘safe haven’ given the turmoil in equity markets. They also started to price in the possibility of an interest rate cut from the ECB as a result of the potential negative effect of COVID-19 on the Eurozone economy.
Sample DC Schemes
Two of our sample DC Strategies fell due to their exposure to growth assets.