InvestNow News – 3rd April – Russell Investments – Now What? A conversation about rebalancing, risk, and unavoidable realities

27th Mar – Erik Ristuben, Global Chief Investment Strategist

With stock markets down roughly 30%, credit spreads widening significantly—and doing so on the back of a Treasury rally—many clients are wisely asking what actions should they be considering going forward?

To answer this, let’s dig into the key issues we’ve been tracking that clearly impact this decision- making process:

  • The path and duration of the viral outbreak itself
  • The response of policymakers
  • Market sentiment
  • Valuations

The virus

How widespread will the outbreak become? How long will it last? And how effective will the mitigation measures be in limiting the impact? The answers to these questions are unknown at this time. But the future of the virus itself—this is far-and-away the biggest risk factor going forward for investors. We are clearly not virologists, but even the true health experts are saying they don’t know the answers to these questions.

What is known at this time is that available evidence appears to show that the very aggressive measure taken in China and South Korea have been effective in containing the outbreak and in limiting the expansion of the virus. In fact, the hard data coming out of China indicates that economic life in that country is slowly returning to more normal levels. They are not anything near completely recovered, and things could change, but for now they seem to be moving in the right direction. Constant vigilance and monitoring will be required to maintain this recovery.

That is not to say that the steps taken in the developed world will be as effective, but as those responses begin to more closely resemble the Chinese response it would seem hope is not entirely misplaced.

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