Weekly Bulletin: Gauging The Virus Shock

Global economic activity is being frozen to stem the coronavirus pandemic. Yet implications for asset prices will depend on the cumulative impact of the growth shortfall over time. We believe that policy actions to cushion the impact of virus shock are nothing short of a revolution. Execution is a risk, but if successful, the cumulative impact of the virus should be well below that seen in the wake of the 2008 global financial crisis (GFC) — despite the historic scale of the initial shock.

Key points

  • Not a Repeat of 2008: The overwhelming policy response to cushion the coronavirus shock is set to prevent a repeat of the 2008 financial crisis, but execution is key.
  • Oil Slump: Oil prices slumped to historic levels, as a huge demand shortfall has squeezed the limited storage capacity.
  • Data Watch: This week’s US consumer confidence data will shed light on how much impact the containment measures have hit consumer spending.

The opinions expressed are as of April 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.

Weekly Bulletin: Upgrading Credit

Unprecedented policy actions to limit the coronavirus shock and sharply lower valuations have improved the outlook for credit, in our view. Major central banks are committed to keep rates low and greatly expand their balance sheets. This underpins demand for corporate bonds and selected sovereign credit. We upgrade our view on global investment grade credit to a moderate overweight from underweight and keep high yield as an overweight.

Key points

  • Policy & Valuations: We upgrade our tactical views on credit on extraordinary central bank support and substantially more attractive valuations.
  • Stalling Rally: The initial market rally from historic US policy actions has stalled as worsening economic data and a rising human toll dominate sentiment.
  • Data Watch: Jobless claims and consumer sentiment data this week are likely to show more signs of economic damage caused by the coronavirus.

The opinions expressed are as of April 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.

Weekly Bulletin: A Shift to Sustainable Investing

It’s important to keep a long-term perspective amid market volatility – such as the extraordinary moves of recent weeks. One enduring trend we see is a move to sustainable investing: a structural shift in investor preferences leading to large and persistent flows into assets perceived as more resilient to sustainability-related risks such as climate change. Investors rebalancing portfolios after the risk asset selloff may consider leaning into sustainable assets.

Key points

  • Long-term trend: Investors should keep a long-term perspective amid market volatility, including a focus on portfolio resilience through sustainable investing.
  • Policy action: Historic US policy actions, including over $2 trillion in fiscal support and a raft of Federal Reserve measures, helped calm markets.
  • Data watch: This week’s data are likely to show further signs of economic damage caused by the coronavirus outbreak and containment measures.

The opinions expressed are as of March 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.