CIO Memoportfolio insights

7 July 2020

As lockdowns ease avoid following the bulls

In brief

  • As lockdowns ease, the chasm between market irrational exuberance and the high level of uncertainty resulting from both the epidemiological and economic standpoint should unnerve long term investors.
  • Global markets have rallied sharply from the panic-fuelled sell-off at the end of March 2020, but the economic and pandemic reality underpins our argument for a defensive play instead of aggression.
  • A bounce from the depressed levels of late March was warranted at some point, but it came surprisingly early and with more intensity than envisaged.
  • Can one justify the magnitude of the bounce in Ghana Eurobonds prices from the mid 60s to the mid 90s over a period of three months? Also, is there a justification for the decline in local bond yields at a time when inflation has reared its ugly head from 7.8% in March to 11.3% in May?
  • Perhaps, investors are becoming comfortable looking past the pandemic and dismissing it as a one-of-a-kind and thus not fundamental.