Market Analysis

A Ray of Light From Austria and Denmark?

In some Continental European nations, the conversation is shifting to easing restrictions as infection rates slow.

Between Prime Minister Boris Johnson’s admission to an intensive care unit and grim forecasts for a sharp acceleration in US COVID-19 deaths this week, we saw precious little good news in financial headlines on Monday. Yet equities jumped globally, seemingly seeing through the bad news and zeroing in on reports that some Continental European nations may begin easing lockdowns in the coming weeks.[i] As always, we think it is important not to read hugely into any one day’s market movement, and short-term moves are unpredictable. So is government policy, in our  view. But we think taking note of somewhat positive developments is important for investors—if not everyone—right now. If nothing else, maybe talk of plans to loosen restrictions is a reminder that there is an eventual endgame to the current crisis. It may even be starting to take shape.

News of Johnson’s illness is, of course, huge. Like everyone suffering from COVID-19, we hope he is in better health very soon. By contrast, the “good” news was minor, in our view. A few days after several financial news outlets highlighted Denmark’s announcement of loose plans to begin easing the restrictions on movement and commerce aimed at slowing COVID-19’s infection rate and easing the strain on hospitals, Austria announced similar plans. Over the past week, various outlets have reported slowing infection rates, even in hard-hit Spain and Italy. That seems to have helped policymakers in some nations see some light at the end of the tunnel and start rethinking their approach to containment.

According to Austria’s announcement, if all goes as policymakers hope, small shops, home improvement stores and garden centers will be free to begin reopening on 14 April, provided patrons wear masks and adhere to social distancing guidelines.[ii] Hair salons and other businesses necessitating closer personal contact will get the green light on 1 May, and public gatherings may return in July. Yet travel may remain restricted, with international travel potentially banned until a vaccine for the novel coronavirus is available.

Other nations seem to be following in Austria and Denmark’s footsteps. France and Spain have reportedly established taskforces to set out a timeline to resume normal activity. Italy is pursing a “phase two” of its containment policy, which would loosen restrictions next month if infection rates continue falling.[iii] Additional reports suggest Germany is working on something similar.[iv]

This doesn’t mean a return life as normal is at hand. These so-called plans are just words at this point—words are subject to change, as we think society’s response to COVID-19 proves. Additionally, we don’t think Continental Europe’s reopening is some huge, immediate global economic swing factor—particularly if the reopening is as gradual as outlined in Austria. Indefinite bans on international travel could have prolonged effects on local commerce, too, as it would generally imply no tourism revenues for shops, restaurants, hotels and attractions.

Yet the planned loosening is still significant, in our view. It hints at the disruptions to business having an end that, however vague, is seemingly taking shape. If infection rates soon start slowing in the US and UK, too, then it could give policymakers similar latitude to consider easing restrictions. That would no doubt be welcome news to all the workers and business owners presently sitting on pins and needles waiting for some sort of lifeline. 

Mind you, we aren’t forecasting that US or UK officials will start talking about loosening restrictions in two or three weeks. Political decisions like this aren’t predictable, in our view. Yet as Monday’s market rise seemingly shows, equity markets won’t necessarily wait for a definitive American or British timetable. Nor do we think they are likely to wait for improving economic data or investor sentiment. Our research shows equity markets move ahead of economic data and widely expected events. Perhaps a simple conversation about restoring normal life is all equities need to begin pricing in that eventuality and looking ahead to the day—be it 12, 18 or 24 months from now—when a vaccine is available and the world can resume travelling and gathering. We think investors seeking long-term growth would benefit from at least considering this possibility.

Again, none of this is a short-term forecast. We think is impossible to know now whether this bear market’s ultimate low is behind or ahead of us. In our view, turning points are only clear with several months’ hindsight. So in the absence of perfect near-term foresight, we think investors’ best move is to look toward the more intermediate-term future, such as the next 12 – 30 months. Politicians’ discussions about ending lockdowns, though vague, are just one more piece of evidence life could be back to normal within that window, enabling businesses and workers to move past this very dark period.



[i] Source: FactSet, as of 6/4/2020. Statement based on MSCI World Index price return in GBP on 6/4/2020.

[ii] “Europe Looks Past Lockdowns as US and Japan Brace for Coronavirus Trauma,” Jon Henley, The Guardian, 6 April 2020.

[iii] “As COVID-19 Deaths Steady, Italy’s Health Minister Eyes Next Phase,” Staff, Reuters, 5 April 2020.

[iv] “Europe Looks for Lockdown Exit Strategy as Rate of new Coronavirus Cases and Deaths Slows,” Holly Ellyatt, CNBC, 6 April 2020.


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