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Global Multi-Asset Viewpoint
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March 02, 2020
Global Recovery Delayed, But Not Derailed
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Global Multi-Asset Viewpoint

Global Recovery Delayed, But Not Derailed

Global Recovery Delayed, But Not Derailed

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March 02, 2020

 
 

In this month’s letter, we address the impact of the recent outbreak of the novel coronavirus on global markets and economies, and what this means for our global investment outlook and portfolios. We believe that the likely economic impact will be a significant hit to China’s growth in the first quarter of 2020, followed by a rebound in the second quarter. The net impact to global GDP growth for the full year is likely to be a modest -30 basis points, based on our analysis, and assuming the virus is contained, as it appears to be.1 This will likely extend the current “goldilocks” environment, further delaying overheating as well as the recovery in global growth that we were expecting in the first half of this year by a couple of quarters. Such an environment will likely be good for bonds, and could also be good for equities if most major equity markets look through the near-term first quarter economic impact, taking into account both the drop and the rebound in activity.

In the second half of February, reports of a rapidly-spreading coronavirus in Wuhan, Hubei Province, China caused fears of a global pandemic. Growth-sensitive assets sold off: from January 17-31, global equities fell -3.6%, U.S. 10-year Treasury yields fell by over -30 basis points to 1.51%, and Brent oil and China H-shares were each down over -10%.2 Most markets have since rebounded, as it appears the virus may be contained. But the economic impact of the containment on China’s economy is likely to be substantial.

 
 

1 MSIM Global Multi-Asset Team analysis and estimates
2 MSIM Global Multi-Asset Team analysis; Bloomberg

 
sergei.parmenov
Managing Director
Global Multi-Asset Team
 
cyril.moulle-berteaux
Head of Global Multi-Asset Team
Global Multi-Asset Team
 
 
 
 

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