In the EU, statistics for both contagion and death by COVID-19 are still diminishing. Relaxing restrictions typically causes a short recurrence. The UK and Sweden are behind the curve.

Back to reality?
The US is in a situation where daily new cases are slowly decreasing, in spite of increased testing, driven by New York and New Jersey figures while in other states figures are rising. Daily mortality figures point in the same direction. Japan is doing well on a very low level.

Attention is shifting to the economic support. Individual EU member states have started support measures and the EU is considering further help, all aimed at the hardest hit: the poor, the unemployed and small businesses. The Japanese reaction looks similar, though there is support for large enterprises. US measures are general in nature: distribution is haphazard and skewed towards large or influential businesses.

Asset allocation
While last month’s figures suggested a boom, reality seems now – at least partially – to have sunk in this month: growth will slow down sharply in Q2 and uncertainty reigns, dominated by the efficiency of economic packages and the ability of COVID-19 to make a come-back. This is reflected in neutral sentiment increasing everywhere, except for euro-zone and UK bonds, where the statistics did not go down sharply last month. This correction works through in net equity sentiment, moving down towards pre-COVID levels. Net bond sentiment converged to a level of -20 to -25% with the EU as outlier at -36%.

Country allocation
The gap between US sentiment on equity and bonds is stabilising, but it still looks as if a boom is expected. Net equity sentiment is back at high levels while bond sentiment stays low.

Euro-zone net equity sentiment has returned to pre-COVID levels, and bond sentiment is stable. UK equity sentiment is trending sideways, while bond sentiment remains flat.

There is an element of post-Brexit uncertainty in the equity trend, now that the EU trade negotiations are on the radar again.

Net sentiment equities

Net sentiment bonds

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Peter Kraneveld, international pensions adviser, PRIME bv