Markets scenarios & risks - September 2020

We marginally amend the narrative of our central and alternative scenario on the back of recent development. Recent data confirm a slower recovery path in line with our central scenario. We therefore increase the probability of our central scenario from 60% to 70% while reducing the likelihood of the upside alternative scenario from 20% to 10%.

Over the recent weeks, the number of cases in Europe has continued to rise, in particular in those countries that have registered an increase of visitors during the summer break. It is also true, though, that there has been a ramp-up in testing, and we will need to wait mid-September to draw conclusions that are more indicative of the potential for a second wave. In the worst case, we do believe that lockdowns, if any, will be selective, as economies are too fragile to afford extensive shutdowns. In contrast, in the US the number of cases has fallen almost 40% since peaking in July, providing a boost to its equity markets.

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