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Commentary on financial market developments – March 2021


  • US: falling unemployment
  • US: more fiscal stimulus


Optimism stemming from the expectation of defeating the COVID-19 pandemic is driving stock prices higher. This, combined with low interest rates, is allowing indices to reach new records. On the other hand, we need to look at the current situation more soberly and not through rose-coloured glasses of optimism. In the wake of the pandemic, huge sovereign debts remain across the world, just as low interest rates and monetary expansion have inflated central bank balance sheets. The volume of money in circulation is also still increasing. If the world economy recovers relatively quickly, this will translate into accelerated inflation, and then it is only a matter of time before central banks are forced to resort to raising interest rates. In very simple terms, governments and central banks have ensured that the impact of the pandemic on the economy as a whole has been kept to a minimum. However, the bail-out bill that has been issued is extreme and now it is time to pay it back. In addition, some sectors such as aviation, tourism or certain types of services (hospitality, etc.) have been dealt a severe blow from which they will take a long time to recover.

Signs of a rapid economic recovery are coming particularly from the United States of America, which is managing to vaccinate quickly and also has a very flexible labour market. On the one hand, this meant rapid lay-offs when the economy was hit by COVID-19; on the other hand, companies are now hiring quickly again. The unemployment rate dropped to 6.2% in March, yet since the pandemic began, there are still 9.5 million fewer jobs than before it arrived. In the US, GDP growth of up to +7% is projected for this year.

World trade took a (minor) hit when the Suez Canal was blocked for almost a week by Evergreen’s giant container ship Ever Given. Eventually, the ship was freed, which was positive news, especially for European markets, which are most dependent on the functioning of the Canal.

Then, at the end of the month, US President Joe Biden unveiled another fiscal stimulus package for the US economy. This second package, amounting to EUR 2.25 trillion, was the first of its kind. This time, it is to be directed mainly at US infrastructure. This would be another significant injection (at the expense of the rising debt) for the US economy, since since the US President has already pushed through 1.9 trillion dollars worth of aid to the Americans since he took office. USD.

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