Economic environment

The fateful year 2020 has earned a permanent place in the history books. With the outbreak of the coronavirus pandemic and the subsequent measures to contain it, gross domestic product experienced a massive collapse in most countries. The global economy is now facing the worst recession since the Great Depression of almost 100 years ago. It was primarily due to the generous aid provided by central banks and governments that the ­economic fallout was not even more severe. Thanks to this support, the retail sector was even able to experience net growth in many industrialised countries, with online trade flourishing in particular. The global manu­facturing sector also enjoyed a noticeable increase in new orders in the second half of the year, with the ­positive economic trend in China serving as a key driver here. 

Against this backdrop, the stock market slump was brief but particularly severe. Among the most effective tools for fighting the crisis was the generous provision of dollar liquidity by US monetary authorities to other central banks via so-called “swap lines”. This meant that the central banks of Great Britain, Canada, Japan and Switzerland, as well as the European Central Bank (ECB), were sufficiently supplied with fresh US dollars. With the knowledge that the global shortage of dollars further exacerbated the financial market crisis, the International Central Bank Cooperation took countermeasures at an early stage this time. 

In the meantime, the Swiss National Bank (SNB) faced significant upward pressure on the Swiss Franc, which it countered with massive foreign exchange market interven­tions. This made Swiss monetary policy in 2020 one of the most expansive in the world even though the SNB did not launch a securities purchase programme like the ECB and the US Federal Reserve (Fed). The SNB also maintained its interest rate policy, refraining from further interest rate cuts, and the negative interest rate situation did not change. 

The equity markets, which started 2020 on solid footing, were shaken up and put to the test by the global health crisis. In particular, industrial and service sectors that are heavily dependent on high mobility experienced extreme economic shock. However, the crisis also demonstrated the strength of the digital transformation, which offered rapid solutions in the segment of the digital economy, automation and telework, as well as additional increases in profitability. Combined with strong fiscal policy mea­sures, this created a sense of confidence that drove the US equity market to new highs within just a few months.

The emerging markets, led by China, also recovered ­disproportionately within a brief period of time, with Europe and the defensive Swiss equities lagging significantly in comparison. This is due to their strong roots in traditional business models as well as a high share in the financial sector, which had consequently experienced a major collapse. With successful development of a ­vaccine against the coronavirus, dynamic value recoveries were seen in equity markets in the fourth quarter.