Equity markets update: focus shifts to exit strategy
After an extremely negative month of March, the equity markets were able to recoup part of their losses in April. Owing to the containment measures, most of the countries are over the peak in the numbers of new Covid-19 infections. Therefore, the focus can shift to restarting the economy. The sectors experiencing the biggest drops in March (consumer goods, industry, automotive, etc.) were the best performers in april. The energy sector also managed to recover partly, while technology and telecommunications performed well both during the correction and during the rebound. These two latter sectors have a heavy weight in the US stock market indices, which explains for a large part the outperformance of that region.
The damage of the lock-down is showing up in the economic figures and corporate earnings even though, in most countries, containment measures were only imposed in the course of March. First quarter earnings for the companies of the S&P500 dropped by approximately 14% (65% of the companies published as at 30 April). It is noteworthy that many companies from various industries (from IBM to Uber) suspended their guidance for the coming quarters. This is due to the uncertainty caused by Covid-19. For the second quarter, the consensus expectations have been revised downward significantly.