Amundi Pension Fund Letter N 10

Today, investors have a unique opportunity to observe the spreading of a real virus alongside the viral nature of financial markets and the real economy. As Nobel Prize-winning economist Robert Shiller points out in his book, “Narrative Economics: How Stories Go Viral and Drive Major Economic Events”, stories and images are created around new economic events1. In some cases, these stories are memories of the past and their spreading can have major implications regarding performances of economies and financial markets.

Two conflicting narratives are now playing in the markets: one positive (election of Joe Biden, news of a vaccine becoming available soon) and one negative (pandemic second wave and its negative economic consequences). In that context, pension funds may follow interest rates movements: they will lead the narrative path and drive investors towards possible changes.

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