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LCP Investment Summary - August 2020
LCP Investment Summary - August 2020

2 September, 2020 by Administrator

Equities Global equity markets rose 5.2%...

LCP Investment Summary  - July 2020
LCP Investment Summary - July 2020

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LCP Investment Summary - March 2020

Posted on 1 April, 2020 by Administrator

LCP Investment Summary - March 2020

Equities
Global equity markets fell 13.4% (in € terms) in March, in what was both an
extraordinary and unprecedented time for investors, with global economic actively hit
sharply as governments worldwide scrambled to stem the spread of COVID-19.

Investors reeled during first three weeks of the month with the enormity of the situation
increasing daily as the virus spread and fatalities rose. Global economic activity
literally ground to a halt, with unemployment soaring, as governments announced
various measures to stem the virus including a virtual ‘lockdown’ in many countries.
Markets also fell sharply over the Saudi Arabia/Russia oil price war, which saw oil
prices plummet 30% in early March.

Equity markets did recover strongly later in the month, but still volatile, from the sharp
lows with investors taking encouragement from the more co-ordinated monetary and
fiscal responses from global central banks and governments. Investors were also
encouraged by signs that China was starting to get back to some degree of economic
normality after being the first casualty of the global pandemic.

Bonds
Longer-dated Eurozone bond prices fell 3.5% in March, with the yield on the AAA
Eurozone 15+ Year Index rising to -0.06% by month-end. The Euro Broad Sovereign
10+ Year Index fell by 5.0% with its yield rising to 0.81%.

It was also a volatile month for bonds with yields initially falling, as investors looked for
a ‘safe haven’ with equities so volatile. Yields then rose sharply mid-month with news
of planned massive government spending in order to combat the damage done by the
virus. Yields fell back again after the ECB announced the launch of a €750bn bond buying

programme (Pandemic Emergency Purchase Programme)
 


Inflation in the Eurozone fell in March as energy prices tumbled due to the coronavirus
and the implications of the various lockdowns across the region. Long-term European
inflation expectations have fallen from 1.3% p.a. at the start of 2020 to 0.8% p.a. at the
end of the quarter.

Sample DC Schemes
Our three sample DC Strategies all fell in March with most assets classes well down.

 

Market Performance over Q1 2020

Global equities fell sharply, down 19.7% (in € terms) in Q1 ’20, as the full
implications of COVID-19 for both fatalities and the global economy eventually sank
in for investors. Economic activity slowed dramatically during March as many
countries imposed varying degrees of ‘lockdown’ in order to stem the spread of the virus.

Longer-dated Eurozone AAA-rated bond prices rose 5.5% (and yields fell) over the
quarter as investors looked to ‘safe haven’ bonds with equity markets so volatile on
coronavirus fears, and also as a result of various policy measures announced during
March like the ECB’s launch of a €750bn bond-buying programme.

Equity Performance
January: After a stellar year for equities in 2019, markets fell in early January
following the killing of Iranian General Qassem Soleimani in a targeted U.S. drone
strike, prompting fears of an escalation in hostilities between both counties and for
the region in general. These fears soon receded, as both sides seemed unwilling to
inflame the situation.

Investors took heart from the signing of the ‘Phase 1’ U.S./China trade deal and also
the release of strong U.S. home construction data and a pick-up in Chinese GDP.
However, markets fell for the reminder of the month as the implications of the
coronavirus began to sink in, with the rising number of fatalities leading to both travel
restrictions within China and the suspension of flights to China. As a result, investors
became concerned about the possible implications on both Chinese and global
economic growth. European export stocks were well down due to their reliance on
the Chinese market.

February: Global equity markets fell sharply, 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.

March: Global equity markets fell sharply again in March, in what was both an
extraordinary and unprecedented time for investors, with global economic actively
hit sharply as governments worldwide scrambled to stem the spread of COVID-19.
Investors reeled during first three weeks of the month with the enormity of the
situation increasing daily as the virus spread and fatalities rose. Global economic
activity literally ground to a halt, with unemployment soaring, as governments
announced various measures to stem the virus including a virtual ‘lockdown’ in
many countries. Markets also fell sharply over the Saudi Arabia/Russia oil price
war, which saw oil prices plummet 30% in early March.

Equity markets did recover strongly later in the month, but still volatile, from the
sharp lows with investors taking encouragement from the more co-ordinated
monetary and fiscal responses from global central banks and governments.
Investors were also encouraged by signs that China was starting to get back to
some degree of economic normality after being the first casualty of the global
pandemic.

Bond Performance
Longer-dated Eurozone bond yields fell in early January over the Iran/U.S.
situation but then rose due to the continuing optimism on the U.S./China ‘Phase 1’
trade deal and on improving global economic growth. However, yields fell sharply
again at month-end as the implications of the rapidly spreading coronavirus on
global economic growth sank in with investors looking for ‘safe-haven’ bonds.

After rising by mid-February, longer-dated Eurozone bond yields fell sharply as
investors looked to these bonds 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.

March was a volatile month for bonds with yields initially falling, as investors looked
for a ‘safe haven’ with equities so volatile. Yields then rose sharply mid-month with
news of planned massive government spending in order to combat the damage
done by the virus. Yields fell back again after the ECB announced the launch of a
€750bn bond-buying programme. Inflation in the Eurozone fell in March as energy
prices tumbled, and long-term European inflation expectations fell from 1.3% p.a. at
the start of 2020 to 0.8% p.a. at the end of the quarter.

 


 

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