Rather than update on the many earnings downgrades, removal of forecasts or ballooning unemployment figures around the world, we thought it worth summarising the views of some of the more experienced asset managers from around the world.
- Morningstar Research: Overall, we see a weighted average hit of 1.5 per cent to 2020 global GDP and 0.2 per cent to long-run global GDP. We forecast a muted long-term impact because damage to productive capacity will be small, plus economic confidence should quickly return once the virus subsides.
Coupled with a huge increase in global fiscal stimulus, this new monetary policy stimulus to combat the adverse effects of the coronavirus will ultimately help the global economy transition through two very negative quarters of GDP growth to what will almost certainly be a vigorous recovery. In fact, we expect the bounce to be among the strongest recorded given the impact of the virus is, when all is said and done, a temporary dislocation that will leave enormous amounts of residual policy stimulus that could ultimately result in a speculative melt-up.
- Aswath Damodaran’s Blog – Musings on the Market: In periods of pricing tumult, like the last three weeks, it is both futile and perhaps counterproductive to try to explain big pricing moves, especially on a day-to-day basis, with the language and tools of value. If I could make a suggestion to the financial news channels now, here is what it would be. Remove all the talking heads (including me) from the screen, and just show the stock indices in real time. This is a market that needs no commentary!
- Pendal Investment Management: The influence of ETFs and passive investing is clearly apparent in the indiscriminate nature of the market sell-off. This has been exacerbated by the effect of risk parity strategies and other systematic approaches needing to de-risk. The market’s sell-off is rational, but indiscriminate selling has led to outcomes which are irrational — such as the poor performance of traditional hedges such as gold.
- ARK Invest: Catherine Wood of ARK Invest suggesting that news and social media is exacerbating what is likely to be a V shaped recovery, with fears and hoarding more viral than COVID 19 itself. Interestingly, she noted that COVID 19 was gene sequenced in just 2 days due to incredible advancements in technology, compared to 5 months for SARS; with a vaccine likely to come faster than expected as well. Looking at the economy before this event, consumers were confident, businesses were not, which should help in an eventual turnaround. She did note the everything will fall but governments are united in their response and resolve, which increases the likelihood of a quick recovery.