Our Insights

Interviews and in-depth reports on the people, enterprises, and markets that are shaping the future.

August 19, 2020
  • Fiscal stimulus is preventing a worst-case scenario for GDPs in the Eurozone, while China’s lax policy supports corporate growth and the U.S. struggles to overcome a congressional stalemate.
  • A volatile week for equity markets contrasts with unchanged long-term outlooks for sovereign bond yields.

In the last two Insights, we discussed the investment opportunities tied to the European Green Deal components in the EU pandemic recovery plan and S.P.H.’s own initial ESG offering. 

Our disciplined investment process integrates material information on how companies manage risks linked to their environmental, social and governance activity into traditional financial analysis. As detailed in our 5 August letter, the process begins by rigorously analyzing data from multiple sources to identify the top performer and results in a selection of companies that represent diverse market capitalization and geographies across developed markets, and industries such as information technology, consumer goods and healthcare, to name a few.

The U.S. housing market is emerging as one of the few bright spots for the otherwise uncertain economic recovery. With interest rates at record lows, building permits recorded their largest increase (18.8%) since 1990 and construction of new homes had its biggest spike since October 2016 (22.6%). August data will clarify the trajectory of the trend, but pent-up demand after months of quarantine appears likely to keep the motivation going.

China favors a domestic recovery

As most of the world faces a drawn-out rebound from the coronavirus pandemic, China’s recovery is taking on a more traditional V-shape. Targeted fiscal policy helped to increase investments by state-owned enterprises amid reduced private consumption. With monetary policy less accommodative than in other major economies, credit demand is muted and will likely result in a slower recovery, as well as a shift away from capital intensive industries to services and household consumption.

Eurozone GDP

Though GDP is an inherently flawed measurement of economic health in the current circumstances, economists were relieved when the second-quarter numbers for European countries were not as bad as feared, making the likelihood of a depression increasingly slim. The Eurozone GDP dropped 12.1% in the quarter after a 3.6% fall in the first quarter, with Spain’s 23% drop the worst. Aggressive stimulus measures prevented a worse outcome, and the European Central Bank forecasts a slow but steady return to pre-pandemic GDP by the end of 2022, though employment rates remain the wild card for the full shape of the recovery.

  • June construction data for the Eurozone is expected to advance by 5.6% for the month after +28% in May
  • The U.S. Congress and the White House remain at a standoff on the next round of stimulus funding after extra unemployment benefits expired at the end of July.

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