BlackRock Commentary: Market equity performance

Jean Boivin, Head of BlackRock Investment Institute together with Elga Bartsch, Head of Macro Research, Mike Pyle, Global Chief Investment Strategist and Scott Theil, Chief Fixed Income Strategist all within the BlackRock Investment Institute share their insights on global economy, markets and geopolitics. Their views are theirs alone and are not intended to be construed as investment advice.

The coronavirus outbreak is set to deliver a sharp and deep economic shock. Market moves are reminiscent of the 2008 crisis, but we don’t think this is a repeat. Stringent containment and social distancing policies will bring economic activity to a near standstill, but provided aggressive fiscal and monetary policy actions are taken to bridge businesses and households through the shock, activity should return rapidly with little permanent economic damage.

Weekly Commentary

 

Developed market equity performance, 2020 vs. 2008

Article Image

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from Refinitiv Datastream , March 2020. Notes: Data are as of March 13, 2020. The yellow line shows the performance of MSCI World Total Return Index since it closed at a record high on Feb. 12, 2020. The orange line shows the performance of the index over the same number of trading days since Sept. 12, 2008, the last trading day before Lehman Brothers declared bankruptcy.


The market’s gyrations have sparked memories of 2008. Developed market stocks have fallen as much as 27% from the February peak, but pared losses on Friday. The magnitude of the selloff is similar to that in the aftermath of Lehman Brothers’ bankruptcy in 2008. See the chart above. We have also seen sharp swings in fixed income, with U.S. Treasury yields first hitting record lows and then closing up on the week. Crude oil prices last week posted their largest single-day decline since the Gulf War amid a price war between Russia and Saudi Arabia. What will it take to stabilize markets? A decisive, preemptive and coordinated policy response is key, in our view. This includes aggressive public health measures to stem the outbreak, as well as coordinated monetary and fiscal easing to prevent disruptions to income streams – especially to households and smaller firms – that could cause lasting economic damage. We see encouraging signs on both sides of the Atlantic that such a monetary and fiscal response is underway. 

The evolution and global spread of the coronavirus outbreak are highly uncertain. What we know: Containment measures and social distancing mechanically bring economic activity to a halt, as seen in China and Italy. There is a strong incentive to enact such measures proactively to slow the growth of coronavirus infections, and France and Spain over the weekend joined Italy in imposing drastic lockdown measures. The impact on economic activity will likely be sharp – and deep. Yet we believe that the sharper the containment measures taken and the deeper the economic hit in the near-term, the more confident we should be about the rebound after such measures are lifted. We see the shock as akin to a large-scale natural disaster that severely disrupts activity for one or two quarters, but eventually results in a sharp economic recovery.

The key assumption behind this view: Policy makers act to stabilize economies and forestall any cash-flow crunches that could lead to financial stresses and tip the economy into a financial crisis. The Fed on Sunday cut rates to near zero, announced up to $700 billion in bond purchases and other measures to ensure the proper functioning of markets, and set up arrangements with other central banks to make U.S. dollar funding available. The White House earlier unlocked disaster funding, and Congress is set to pass a bill to cover health care and paid leave for some workers. A more sizable fiscal response is possible amid growing recognition in Congress that this is needed. The UK last week delivered on a coordinated set of measures including a Bank of England rate cut and a budget that included relief to affected sectors. This, and similar moves by Canada last week, is the type of coordinated monetary and fiscal action that we have flagged a need for in dealing with the next downturn. The European Central Bank provided material relief to the banking system at the heart of financing the euro area economy, and several European nations signaled they will significantly loosen fiscal policy. Yet the ECB’s move was not the “whatever it takes” package markets had expected, and bond yields of some peripheral nations jumped.

 

Market Updates

 

Selected asset performance, 2020 year-to-date and range

Article Image 2

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from Refinitiv Datastream, March 2020. Notes: The two ends of the bars show the lowest and highest returns versus the end of 2019, and the dots represent year-to-date returns. Emerging market (EM), high yield and global corporate investment grade (IG) returns are denominated in U.S. dollars, and the rest in local currencies. Indexes or prices used are: spot Brent crude, MSCI USA Index, the ICE U.S. Dollar Index (DXY), MSCI Europe Index, Bank of America Merrill Lynch Global Broad Corporate Index, Bank of America Merrill Lynch Global High Yield Index, Datastream 10-year benchmark government bond (U.S. , German and Italy), MSCI Emerging Markets Index, spot gold and J.P. Morgan EMBI index.

 

The contours of a policy response to coronavirus are starting to take shape as the outbreak – and related containment measures – propagates across the globe. A credible response will require a joint effort between fiscal and monetary policy (see the following page for more). To date, the policy response has failed to stabilize markets, with U.S. equities last week registering their sharpest one-day decline since Black Monday of 1987 and European equities suffering their largest daily loss in history.

Week Ahead

  • Tuesday: U.S. industrial output and retail sales; Germany ZEW economic sentiment
  • Thursday: Philadelphia Fed manufacturing business outlook survey

After a flurry of interest rate cuts by global central banks, growth data may return to the spotlight this week as markets grapple with the extent of the economic fallout from the coronavirus outbreak. China’s industrial output and retail sales data for February likely will show a slump.


 

BlackRock’s Key risks & Disclaimers:

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of March 16, 2020 and may change. The information and opinions are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal. International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation, and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are often heightened for investments in emerging/developing markets or smaller capital markets. 

Issued by BlackRock Investment Management (UK) Limited, authorized and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL



MeDirect Disclaimers:

This information has been accurately reproduced, as received from  BlackRock Investment Management (UK) Limited. No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

The financial instruments discussed in the document may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.

If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment and may be deducted from the invested amount therefore lowering the size of your investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest in a mutual fund should always be based upon the details contained in the Prospectus and Key Investor Information Document (KIID), which may be obtained from MeDirect Bank (Malta) plc.

Liontrust Insights: Economic Impact of Coronavirus

Liontrust GF High Yield Bond Fund is manufactured by Liontrust Fund Partners LLP and represented in Malta by MeDirect Bank (Malta) plc.

By Phil Milburn, Liontrust Global Fixed Income Team

 While I can claim no expertise in infectious viral pandemics, I can hopefully offer a couple of insights into the economic part of the Coronavirus situation. After dramatic falls in risk markets, comparisons are being made with the 2007-09 credit crisis but, economically, this crisis is nowhere near as bad. So why do I say this?

An existential crisis for the financial system? No

Put simply, the whole system almost collapsed in 2007/08; the world was a matter of days away from paper money being almost worthless and if that money was stored in a bank account, it would have disappeared.

Coronavirus will cause a global recession; for the pedants who use the technical definition, which is two negative quarters, Q1 might scrape into positive territory due to the delayed impact of the virus but the run rate is recession. We believe the correct reaction is to worry about the depth and length of this recession, but unless it becomes a multi-year event, the system will survive. Do bear in mind that the global economy was in good shape coming into this crisis with an upswing starting post 2019’s trade wars.

Accessing liquidity more important than the price

Central banks around the world have been cutting interest rates to help mitigate the worst of the economic impact. In my opinion, these cuts pale into insignificance compared to the liquidity measures being provided: the Federal Reserve announced a $1.5trillion package on 12 March for example. The key here is accessing money, not the price of money.

In 2007/08, when liquidity dried up, large corporates drew down on their committed, previously undrawn, bank facilities; in this cycle, the banks have far less exposure to this sudden balance sheet expansion. Crucially, the central banks are providing liquidity lines to enable the financial system to comfortably fund these needs.

As an aside, a few large companies, and those owned by private equity, are already drawing down credit lines, thinking they have a first-mover advantage; this is analogous to someone buying all the hand sanitisers from the supermarket and also entirely self-defeating. If you drain all the liquidity, then you hurt your customers and suppliers; if you buy all the hand sanitisers, other people are more likely to catch the virus and pass it on to you.

For smaller companies, the need to access money is even greater as the temporary shutdowns create a major drag on working capital as well as profitability. This is where programs such as the Bank of England’s TFSME (term funding for SMEs) come in to play. There is a mismatch as it is not term funding that most small companies will need, rather a drawing on their revolving credit facilities (basically like an overdraft facility) for a few quarters. The banks’ treasury departments can easily manage this.

Another way of freeing up banks’ lending capacity is to reduce capital needs; the Bank of England has removed the counter cyclical buffer and the European Central Bank has relaxed capital rules.

The liquidity injections from central banks are all about managing the supply side of the equation and designed to help the real economy by providing huge funding through the financial system as an intermediary. So, what about the demand side of things?

Keeping the consumer solvent

Included in the financial system measures are policies to encourage loan forbearance, this includes corporate lending and household mortgage servicing. These vary by jurisdiction with Italy being a leader for obvious reasons. The point here is to avoid creating corporate insolvencies, rising unemployment and homelessness during what should be a temporary disruption to activity.

The fiscal side of the equation is also essential here, providing sick pay, subsidising temporary reduced hours or covering wages if possible. Labour markets were tight going into this crisis so one should envisage that most companies will do their best to hold onto staff, albeit with some on reduced pay.

The most economically vulnerable are the self-employed and gig sector workers, for whom a financial safety net during the virus would be a massive boon. Overall, provided employment remains solid then the consumer will stay strong and this sets us up well for a decent growth rebound in H2.

Other fiscal packages are also being worked on. The US is likely to pass its act through congress later today. Germany is now actively talking about temporarily sacrificing their budgetary “black line” and I would expect an announcement next week.

Minding the temporary gap

In conclusion, there already have been a lot of policy responses to help mitigate the economic damage caused by Coronavirus. The financial system will comfortably remain solvent. Given the amount of monetary and fiscal stimulus, if the virus impact peaks in Q2, then the second half of the year should see a significant growth boon.

 


Liontrust Key risks and Disclaimers

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term. Investment in the GF High Yield Bond Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The value of fixed income securities will fall if the issuer is unable to repay its debt or has its credit rating reduced. Generally, the higher the perceived credit risk of the issuer, the higher the rate of interest. Bond markets may be subject to reduced liquidity. The Fund may invest in emerging markets/soft currencies and in financial derivative instruments, both of which may have the effect of increasing volatility.

Issued by Liontrust Fund Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518165) to undertake regulated investment business. This document should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing. 


MeDirect Disclaimers

This information has been accurately reproduced, as received from Liontrust Fund Partners LLP. No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

The financial instruments discussed in the document may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.

If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment and may be deducted from the invested amount therefore lowering the size of your investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest should always be based upon the details contained in the Prospectus and Key Investor Information Document (KIID), which may be obtained from MeDirect Bank (Malta) plc.

 

Liontrust Insights: Economic Impact of Coronavirus

Liontrust GF High Yield Bond Fund is manufactured by Liontrust Fund Partners LLP and represented in Malta by MeDirect Bank (Malta) plc.

By Phil Milburn, Liontrust Global Fixed Income Team

 While I can claim no expertise in infectious viral pandemics, I can hopefully offer a couple of insights into the economic part of the Coronavirus situation. After dramatic falls in risk markets, comparisons are being made with the 2007-09 credit crisis but, economically, this crisis is nowhere near as bad. So why do I say this?

An existential crisis for the financial system? No

Put simply, the whole system almost collapsed in 2007/08; the world was a matter of days away from paper money being almost worthless and if that money was stored in a bank account, it would have disappeared.

Coronavirus will cause a global recession; for the pedants who use the technical definition, which is two negative quarters, Q1 might scrape into positive territory due to the delayed impact of the virus but the run rate is recession. We believe the correct reaction is to worry about the depth and length of this recession, but unless it becomes a multi-year event, the system will survive. Do bear in mind that the global economy was in good shape coming into this crisis with an upswing starting post 2019’s trade wars.

Accessing liquidity more important than the price

Central banks around the world have been cutting interest rates to help mitigate the worst of the economic impact. In my opinion, these cuts pale into insignificance compared to the liquidity measures being provided: the Federal Reserve announced a $1.5trillion package on 12 March for example. The key here is accessing money, not the price of money.

In 2007/08, when liquidity dried up, large corporates drew down on their committed, previously undrawn, bank facilities; in this cycle, the banks have far less exposure to this sudden balance sheet expansion. Crucially, the central banks are providing liquidity lines to enable the financial system to comfortably fund these needs.

As an aside, a few large companies, and those owned by private equity, are already drawing down credit lines, thinking they have a first-mover advantage; this is analogous to someone buying all the hand sanitisers from the supermarket and also entirely self-defeating. If you drain all the liquidity, then you hurt your customers and suppliers; if you buy all the hand sanitisers, other people are more likely to catch the virus and pass it on to you.

For smaller companies, the need to access money is even greater as the temporary shutdowns create a major drag on working capital as well as profitability. This is where programs such as the Bank of England’s TFSME (term funding for SMEs) come in to play. There is a mismatch as it is not term funding that most small companies will need, rather a drawing on their revolving credit facilities (basically like an overdraft facility) for a few quarters. The banks’ treasury departments can easily manage this.

Another way of freeing up banks’ lending capacity is to reduce capital needs; the Bank of England has removed the counter cyclical buffer and the European Central Bank has relaxed capital rules.

The liquidity injections from central banks are all about managing the supply side of the equation and designed to help the real economy by providing huge funding through the financial system as an intermediary. So, what about the demand side of things?

Keeping the consumer solvent

Included in the financial system measures are policies to encourage loan forbearance, this includes corporate lending and household mortgage servicing. These vary by jurisdiction with Italy being a leader for obvious reasons. The point here is to avoid creating corporate insolvencies, rising unemployment and homelessness during what should be a temporary disruption to activity.

The fiscal side of the equation is also essential here, providing sick pay, subsidising temporary reduced hours or covering wages if possible. Labour markets were tight going into this crisis so one should envisage that most companies will do their best to hold onto staff, albeit with some on reduced pay.

The most economically vulnerable are the self-employed and gig sector workers, for whom a financial safety net during the virus would be a massive boon. Overall, provided employment remains solid then the consumer will stay strong and this sets us up well for a decent growth rebound in H2.

Other fiscal packages are also being worked on. The US is likely to pass its act through congress later today. Germany is now actively talking about temporarily sacrificing their budgetary “black line” and I would expect an announcement next week.

Minding the temporary gap

In conclusion, there already have been a lot of policy responses to help mitigate the economic damage caused by Coronavirus. The financial system will comfortably remain solvent. Given the amount of monetary and fiscal stimulus, if the virus impact peaks in Q2, then the second half of the year should see a significant growth boon.

 


Liontrust Key risks and Disclaimers

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term. Investment in the GF High Yield Bond Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The value of fixed income securities will fall if the issuer is unable to repay its debt or has its credit rating reduced. Generally, the higher the perceived credit risk of the issuer, the higher the rate of interest. Bond markets may be subject to reduced liquidity. The Fund may invest in emerging markets/soft currencies and in financial derivative instruments, both of which may have the effect of increasing volatility.

Issued by Liontrust Fund Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518165) to undertake regulated investment business. This document should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing. 


MeDirect Disclaimers

This information has been accurately reproduced, as received from Liontrust Fund Partners LLP. No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

The financial instruments discussed in the document may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.

If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment and may be deducted from the invested amount therefore lowering the size of your investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest should always be based upon the details contained in the Prospectus and Key Investor Information Document (KIID), which may be obtained from MeDirect Bank (Malta) plc.

 

BlackRock Commentary: Market equity performance

Jean Boivin, Head of BlackRock Investment Institute together with Elga Bartsch, Head of Macro Research, Mike Pyle, Global Chief Investment Strategist and Scott Theil, Chief Fixed Income Strategist all within the BlackRock Investment Institute share their insights on global economy, markets and geopolitics. Their views are theirs alone and are not intended to be construed as investment advice.

The coronavirus outbreak is set to deliver a sharp and deep economic shock. Market moves are reminiscent of the 2008 crisis, but we don’t think this is a repeat. Stringent containment and social distancing policies will bring economic activity to a near standstill, but provided aggressive fiscal and monetary policy actions are taken to bridge businesses and households through the shock, activity should return rapidly with little permanent economic damage.

Weekly Commentary

 

Developed market equity performance, 2020 vs. 2008

Article Image

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from Refinitiv Datastream , March 2020. Notes: Data are as of March 13, 2020. The yellow line shows the performance of MSCI World Total Return Index since it closed at a record high on Feb. 12, 2020. The orange line shows the performance of the index over the same number of trading days since Sept. 12, 2008, the last trading day before Lehman Brothers declared bankruptcy.


The market’s gyrations have sparked memories of 2008. Developed market stocks have fallen as much as 27% from the February peak, but pared losses on Friday. The magnitude of the selloff is similar to that in the aftermath of Lehman Brothers’ bankruptcy in 2008. See the chart above. We have also seen sharp swings in fixed income, with U.S. Treasury yields first hitting record lows and then closing up on the week. Crude oil prices last week posted their largest single-day decline since the Gulf War amid a price war between Russia and Saudi Arabia. What will it take to stabilize markets? A decisive, preemptive and coordinated policy response is key, in our view. This includes aggressive public health measures to stem the outbreak, as well as coordinated monetary and fiscal easing to prevent disruptions to income streams – especially to households and smaller firms – that could cause lasting economic damage. We see encouraging signs on both sides of the Atlantic that such a monetary and fiscal response is underway. 

The evolution and global spread of the coronavirus outbreak are highly uncertain. What we know: Containment measures and social distancing mechanically bring economic activity to a halt, as seen in China and Italy. There is a strong incentive to enact such measures proactively to slow the growth of coronavirus infections, and France and Spain over the weekend joined Italy in imposing drastic lockdown measures. The impact on economic activity will likely be sharp – and deep. Yet we believe that the sharper the containment measures taken and the deeper the economic hit in the near-term, the more confident we should be about the rebound after such measures are lifted. We see the shock as akin to a large-scale natural disaster that severely disrupts activity for one or two quarters, but eventually results in a sharp economic recovery.

The key assumption behind this view: Policy makers act to stabilize economies and forestall any cash-flow crunches that could lead to financial stresses and tip the economy into a financial crisis. The Fed on Sunday cut rates to near zero, announced up to $700 billion in bond purchases and other measures to ensure the proper functioning of markets, and set up arrangements with other central banks to make U.S. dollar funding available. The White House earlier unlocked disaster funding, and Congress is set to pass a bill to cover health care and paid leave for some workers. A more sizable fiscal response is possible amid growing recognition in Congress that this is needed. The UK last week delivered on a coordinated set of measures including a Bank of England rate cut and a budget that included relief to affected sectors. This, and similar moves by Canada last week, is the type of coordinated monetary and fiscal action that we have flagged a need for in dealing with the next downturn. The European Central Bank provided material relief to the banking system at the heart of financing the euro area economy, and several European nations signaled they will significantly loosen fiscal policy. Yet the ECB’s move was not the “whatever it takes” package markets had expected, and bond yields of some peripheral nations jumped.

 

Market Updates

 

Selected asset performance, 2020 year-to-date and range

Article Image 2

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from Refinitiv Datastream, March 2020. Notes: The two ends of the bars show the lowest and highest returns versus the end of 2019, and the dots represent year-to-date returns. Emerging market (EM), high yield and global corporate investment grade (IG) returns are denominated in U.S. dollars, and the rest in local currencies. Indexes or prices used are: spot Brent crude, MSCI USA Index, the ICE U.S. Dollar Index (DXY), MSCI Europe Index, Bank of America Merrill Lynch Global Broad Corporate Index, Bank of America Merrill Lynch Global High Yield Index, Datastream 10-year benchmark government bond (U.S. , German and Italy), MSCI Emerging Markets Index, spot gold and J.P. Morgan EMBI index.

 

The contours of a policy response to coronavirus are starting to take shape as the outbreak – and related containment measures – propagates across the globe. A credible response will require a joint effort between fiscal and monetary policy (see the following page for more). To date, the policy response has failed to stabilize markets, with U.S. equities last week registering their sharpest one-day decline since Black Monday of 1987 and European equities suffering their largest daily loss in history.

Week Ahead

  • Tuesday: U.S. industrial output and retail sales; Germany ZEW economic sentiment
  • Thursday: Philadelphia Fed manufacturing business outlook survey

After a flurry of interest rate cuts by global central banks, growth data may return to the spotlight this week as markets grapple with the extent of the economic fallout from the coronavirus outbreak. China’s industrial output and retail sales data for February likely will show a slump.


 

BlackRock’s Key risks & Disclaimers:

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of March 16, 2020 and may change. The information and opinions are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal. International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation, and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are often heightened for investments in emerging/developing markets or smaller capital markets. 

Issued by BlackRock Investment Management (UK) Limited, authorized and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL



MeDirect Disclaimers:

This information has been accurately reproduced, as received from  BlackRock Investment Management (UK) Limited. No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

The financial instruments discussed in the document may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.

If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment and may be deducted from the invested amount therefore lowering the size of your investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest in a mutual fund should always be based upon the details contained in the Prospectus and Key Investor Information Document (KIID), which may be obtained from MeDirect Bank (Malta) plc.

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