Over recent weeks the global economy and financial markets have experienced an unprecedented shock. In recent times there has never been a situation like COVID-19, which has resulted in, not a slowdown in the global economy, but a lockdown.
Financial markets have struggled to process these uncertainties and although there is hope that this does not last long, it will mean significant disruption as a large part of the World’s economy goes into hibernation. This will cause financial stress for businesses, economies and consumers. However, there has been a rapid response from Governments’ and Central Banks’ to try and ensure unnecessary financial stress is avoided, triggering a downward economic spiral. Essentially, there is commitment to a “whatever-it-takes” approach of financial stimulus in order to bailout the real economy.
Financial markets face three key challenges that require separate targeted policy responses. In the short-term, for markets to stabilise investors will need to be more confident these have been addressed.
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