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House Views - April 2020: A sudden stop

From a macro-economic perspective, the global spread of COVID-19 has been a game-changer for the outlook; it has created an economic “sudden stop”.
06 April 2020
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    Key takeaways:

    • The global spread of COVID-19 and containment policies deployed to contain its spread have created an economic “sudden stop”. A sharp recession now seems inevitable, and there are many uncertainties about what follows
    • Market pricing discounts a 2008-like event, but the nature of this shock is very different. Meanwhile, medium-term asset class returns have improved significantly
    • After this fastest bear market on record, many analysts have drawn a parallel for today’s crisis from 2008. It is an important assumption, because it drives any conclusions around the shape of the recession, the subsequent recovery, and the outlook for investment markets
    • But there is an important “silver lining” for investors. The abrupt market action means that risk asset class pricing has shifted significantly. That, in turn, meaningfully improves the strategic outlook for credits, equities, and many alternatives