Coronavirus Market Insight: Update 3rd April 2020

3 April, 2020 | News

How and when will financial markets recover?

 

This update might be a little ambiguous but that’s because there are still some unknowns.

 

Here are my thoughts on what the recovery may look like.

 

Whilst there are still unknowns, markets will continue to be priced based on a reasonable worst-case expectation. That is, that there will be continued business disruption from lockdowns that would likely lead to job loss and reduced productivity. This would be in the likely scenario where mass immunisation will need to be achieved for the virus to come under control and that will be done prior to when an effective vaccine is developed.

 

With that as the expected worst-case scenario, there is still the unknown of exactly how many jobs will be lost due to the business disruption. Clearly, the government want this to be low and have put significant financial measures in place and stated they are willing to do more if necessary. If this is how it plays out, the recovery would be expected to be significantly slower than the decline and would likely be until there is mass immunity and all lockdowns have been lifted. I will leave the prediction on how long this may take to the virus and medical experts, but I am sure you are aware that, at the moment, these opinions still have some variation.

 

For markets to recover as quickly as they have declined, there would need to be a definitive end in sight and that would need to be in the near future. This could be from an effective vaccine or in the event of effective and widespread antibody testing showing that there is already significant immunity.  This would then mean businesses would likely be able to get back to normal levels of productivity with minimal job loss allowing markets to recover quickly.

 

If those events happen after a longer period of time however, there will more likely be a higher level of business disruption and job loss, which would then cause a slower recovery as consumer spending gradually increases where unemployment improves more slowly.

 

As always, we are still here, still working and happy to take any queries you may have.

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