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Investment in a post-crisis world
Record-low interest rates, strong investor demand and government support could see world markets return to a bull market within months of the COVID-19 pandemic, but investors should be rethinking their assumptions about the financial landscape post-crisis, an industry expert has warned.
Investment in a post-crisis world
Record-low interest rates, strong investor demand and government support could see world markets return to a bull market within months of the COVID-19 pandemic, but investors should be rethinking their assumptions about the financial landscape post-crisis, an industry expert has warned.
As world markets begin to rally from the bottom, investors are being advised to consider the near-term cost of the crisis and focus on economic and financial conditions that are likely to prevail once the crisis is over.
T.Rowe Price’s head of investments and group chief investment officer, Rob Sharps, believes that while the bull market could return by June, economic activity and earnings have changed, meaning investors may need to adapt as well.
“Focus on whether companies are positioned to make it in the long term,” Mr Sharps said.
“This is about the cost of making it to the other side. This means looking carefully at liquidity profiles, maturity dates, balance sheets and other data points… The more staying power and flexibility firms have, the better. Raising capital now will be expensive.”
But investors also need to be on the lookout for more downside risks, including the potential for a second wave of the pandemic in parts of Asia and financial or political stress in Europe.
Potential upside possibilities include advancements in drug treatments and progress towards an effective vaccine, but things are still going to get worse before they get better.
“Unemployment claims will spike (tens of millions of people work in industries that are directly impacted by the pandemic), economic statistics will crater, and companies will retract earnings guidance and suspend dividends,” Mr Sharps said.
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