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22 June 2020, Sweden | Mutual Funds | News

Pandemic, Dysphoria and Euphoria

The first half of the year was characterised by world changing events. After a calm start to the year, with a cautiously rising stock market during January and large parts of February, the following month turned into complete chaos. Thereafter we have seen some kind of normalisation even though the uncertainty remains high.

During a crisis of this calibre, if feels wrong to discuss money, financial markets and the other issues we tend to focus on. Across our world, many have been impacted by tragedies as a wave of illness and death struck into our everyday lives. We have to offer our condolences to those who have passed away too early and have suffered as a consequence of the virus, as direct victims or close relatives. Nothing has been as normal during the last months and seldom has the expression "strange times" felt more appropriate to express what we are going through.

One, among few, positive effects that Covid-19 has led to is that many have been forced to halt, think and reflect around the everyday lives that normally just pass quickly. When a restaurant visit suddenly feels like taboo, and a trip to the Mediterranean totally off, you are reminded on how spoiled you have been. One has taken everything for granted. To be healthy, live and travel freely and enjoy time with friends and relatives at home or in a restaurant.

Covid-19 will leave scars in society for a long period. Hopefully the spread of the disease will slow down. Currently the situation remains uncertain and we can only hope for the best. However, many will for sure be impacted how they live their lives. At least in the short and medium term. Those who have been impacted after a travel maybe would like to avoid that whereas others may have a pent up demand after having felt locked in. Some will avoid meeting at larger gatherings while other feel a need to meet other people. Regardless of which camp you belong to, I think that it will be clearer that you take a more active decision than previously and that you reflect over what choices you make. Hopefully you enjoy more the travels you do and the dinners you choose to attend.

Finally, a connection to the financial markets. We have during the last 6 months witnessed one of the strongest market drawdowns in almost 100 years. Thereafter we have seen one of the strongest recoveries. The highest volatility in a very long time and the largest stimulus packages from central banks and governments ever. This can only be observed as extreme. The US equity benchmark indices are down a few percent on the year, but the trip started with a fall of around 40 percent followed by recovery of similar magnitude.

When humanity started flying jets between continents to a larger extent during the 50's and beginning of the 60's the term jetlag was invented. Jetlag is caused by the body's daily rhythm not being synchronised with the real time where you are located. That is the feeling right now. The equity market has quickly changed from dysphoria and despair in the middle of March to a euphoric comeback back to where it started. The real economy does not move that fast. Covid-19 and the impact of all the lockdowns in society is an extended episode and which also does not have a normally distributed sequence of events. We should probably pause and reflect over what the long term consequences are and act accordingly. Maybe the equity market needs to do the same.

In the middle of these world changing events, there are things happening in our own organisation. After more than 20 years under Catella's umbrella it's time for Catella Fund Management to take a new step. With Athanase as a new owner, after customary ownership approvals by the Swedish FSA and CSSF, we look forward to a new chapter after the summer. Our ambition is that you as clients will have a better customer experience and that you will see new innovative products. As always, we thank you for your trust in these turbulent times and hope that you will support us on our new journey going forward.

I wish you a really pleasant summer!

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