InvestNow News – 3rd April – ANZ – The Month Ahead – April 2020
The first quarter of 2020 was an unprecedented one for global markets as the COVID-19 (coronavirus) outbreak weighed heavily on sentiment as the outlook for global growth and trade worsened. By the end of March, the coronavirus had infected more than 700,000 people with more than 35,000 deaths.
On the back of the crisis, several equity benchmarks fell as much as 30% from their record highs. However, as of 30 March, we had seen a decent rebound in stocks with some indices regaining as much as 10%. As of 30 March, the MSCI World Index was down about 14% (local currency), since the beginning of March.
As we head into April we are expecting further periods of volatility with most eyes on the continuing fallout of coronavirus as well as economic data that will begin to shed light on the hit the economy has taken. Here are some key themes ANZ is following this April.
CORONAVIRUS
The developments surrounding coronavirus and its impact will again be front and centre heading into April. Markets have moved quickly to price in the recession that is already underway from the impact of coronavirus induced lockdowns on entire cities and countries. Markets will now focus on the pathway out of the recession and how the very large fiscal and monetary policy supports will help economies ‘bridge’ the lockdown periods. In assessing the extent of the contraction, we are closely monitoring the following key areas:
- Health – looking for signs that cases are peaking: The speed of the coronavirus spread will be important in determining when the peak in cases is reached. This will determine when we begin to see border restrictions loosen, freeing up trade. Additionally, we are closely monitoring the progress being made for any potential vaccine or anti-viral medication.
- Fiscal and monetary policy: We have seen unprecedented fiscal policy responses from governments that are injecting billions of dollars into local economies to try and soften the blow. However, as the economic and social fallout becomes clearer, we will be eyeing the potential for continued stimulus, which some are projecting to reach 10% of GDP. Likewise, global central banks have acted swiftly to deliver accommodative monetary policy and we expect them to continue to use a wide range of tools at their disposal.
- Market conditions and pricing: As governments and central banks roll out policy measures, we are closely watching market conditions such as liquidity and cross-asset pricing, from both a short and long-term perspective. As the market conditions change we are looking for signs of attractive long-term asset prices.