Karen Ward Chief Market Strategist for EMEA, Tai Hui Chief Market Strategist for Asia Pacific
The spread of the coronavirus and its impact on global economic activity are increasingly troubling investors. Trying to predict the final outcome is a fool’s errand. Instead, in this piece we provide a framework for tracking infection rates globally and monitoring the impact on economic activity, using high frequency or daily data. We then consider government and central bank interventions that might support the households and firms affected and facilitate an economic recovery, as well as providing an overview of the market reaction to date.
Theclear investment implication isthat, even morethan usual, awell-diversified portfolio is essential. This includes diversification by region but also by asset class. Core government bonds have performed strongly. However, further upside for US Treasuries and UK gilts will be more limited from here unless these central banks shift their guidance that they do not intend to take interest rates into negative territory. Investors may wish to consider alternative diversifiers such as macro funds, or real assets if liquidity isnotarequirement.
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