The West has mobilized in just over a week the largest amount of resources that is remembered in peacetime.

Governments, multilateral organizations and central banks have removed their heavy artillery. However, financial markets are still in panic mode.

Why?

Because investors only have eyes for medical advances in the fight against the coronavirus, trying to gauge the magnitude of the economic damage.

At this stage, rescue packages are necessary but insufficient to calm markets. In the short term, only the evolution of the pandemic could alleviate investors, explains DWS, one of the largest European fund managers.

On the stock market, fears related to the virus are outweighing the multiple efforts of governments to send peace of mind through stimulus packages. The markets are not looking for liquidity, but for solutions to the virus and no government in the world has it.

Barclays anticipates a “global recession” due to the blockade suffered by the world economy and there is still a long way to go before seeing the light at the end of the tunnel.

The situation will not stabilize until the pandemic is controlled in the West. Containment measures have worked in China, so you can expect something like this to happen in Europe and the US and the situation will improve in the spring. However, the worst may be yet to come.

The world enters an unknown situation. The crisis is as much of supply as of demand. In a global world, many production chains have been stunted, leading to many factories to shut down.

On the consumer side, if uncertainty about what impact this crisis will have on their employment and on their pocket is added to the restriction of movements by quarantine, the result is a sudden slowdown in consumption except for basic necessities.

Covid-19 is testing the business models and viability of many companies. What is happening in the Stock Exchanges makes all the sense in the world.

We cannot turn off the engine of consumption, which represents 70% in economies like the United States, and hope that there will not be a large impact.

Volatility, measured with the Vix index or indicator of fear, is extreme and experts, despite sharp falls in prices, continue to make calls for caution because they believe that the stock markets have not yet registered the destruction of a quarantined world economy.

Markets have yet to price the full impact that this situation is going to have on business results. Forecasts have yet to be cut down further. So although the setbacks are significant, we are still expecting further declines.

Knowing when the market will bottom is almost impossible since it depends on many exogenous and difficult to predict factors, such as the timing and content of political decisions and progression of the Covid-19 pandemic.

We are not in a market where you can buy indiscriminately. Against this background, is there any sector in which to take shelter while waiting for the storm to subside?

Activities such as telecommunications, public services and pharmaceuticals are relatively immune to economic cycles and have more defensive characteristics.

These companies offer products and services that are needed equally in positive and negative periods.

Although financial markets have not yet found a bottom, in the debt market the intervention of the ECB of Europe has managed to stop the escalation of risk premiums. Neither monetary nor fiscal policy can be a panacea for this shock to the economy.

The only thing they can do is mitigate some of the risks that lead to that shock turning into a huge financial crisis and support an eventual recovery.

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