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Summary of the webcast with Juan Nevado
It has been a very volatile and somewhat frightening month for markets; a ‘perfect storm’. This has meant a sharp decline in all risk assets, which have become heavily correlated.
The biggest issue is the huge uncertainty brought on by the world economy coming to a sudden halt, hence the significant de-risking we have seen in markets. However, we don’t believe that this situation is like 2008, when there was a massive misallocation of capital in the financial system combined with excessive leverage in banks. In addition, governments and central banks have been announcing new fiscal and monetary support measures on a daily basis. It is also possible that these policies will have a long-term effect on interest rates and inflation. The outcomes are very difficult to forecast but we can look instead at the psychology of the markets.