Looking past the peak

  

UBS House View

Just a month ago, we didn’t know whether western democracies’ unprecedented lockdowns would be sufficient to slow the spread of the coronavirus. Now, markets have risen sharply as investors have dared to look beyond the peak of the pandemic. Given that the central scenario laid out in last month’s Monthly Letter (in which new cases of the virus peaked by mid-April) is playing out as expected, this letter refreshes our scenario analysis, and considers the next three phases of the coronavirus crisis so investors can evaluate the risks and opportunities that lie ahead.

In this monthly letter, we explore the risks and opportunities that lie ahead in the next phases of the COVID-19 crisis. We split our analysis into three main phases: normalization, recovery, and post-crisis. Over the coming months, we think the market is likely to be driven primarily by: a) how quickly we can move through the normalization phase, and b) estimates of how far through the recovery phase we can get during 2021. Our central scenario, in which intermittent lockdowns through 2020 mean that some broad recovery phase can only sustainably get underway in 2021, is already priced in by broad equity indexes. But there is no paucity of opportunity in markets today.

UBS House View

Our publication "UBS House View" gives you a compact overview of UBS's opinions on the financial markets. Drawing on our global investment and research capabilities, it aims to offer you the best, most up-to-date investment guidance.