Barings: Only the Second Quarter Will be Really Bad

Barings: Only the Second Quarter Will be Really Bad

How can current economic developments in Europe and the USA be classified? The strategists of the Barings Investment Institute are dealing with this question. And the outlook is extremely worrying.

The strategists at the Barings Investment Institute see a contradiction between the positive news from health authorities and research institutes involved in the development of a vaccine against the corona virus and the current headlines. Some of the quarterly reports generally provide a better overview of which companies are well positioned for the coming months.

Investors would therefore be well advised to keep an eye on the US dollar: If the US dollar weakens again, this could be a positive signal, as investors will then again be able to invest outside the safe haven zone. However, one factor is giving the strategists food for thought: the eurozone inflation data for April are extremely low, while Italy and Spain appear to be struggling with deflation. But can these data be correct?

After all, most of the relevant businesses were closed in April. As a result, the data can only be extrapolated by the relevant statistical offices on the basis of existing data – and thus can be anything but reliable. A significant deterioration is expected for the second quarter. Although the first quarter was already bad, with GDP in the eurozone falling by 3.8 per cent on the previous quarter and by 3.3 per cent year-on-year, it remains relatively insignificant. The strategists are forecasting even worse figures for the second quarter. It is also too early to say whether the bottom has already been reached. And until it is identified, the economic extent of the corona crisis cannot yet be quantified.

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