BlackRock Commentary: Current Macro Outlook

Mike Pyle, Global Chief Investment Strategist of BlackRock together with Elga Bartsch, Head of Macro Research, Scott Theil, Chief Fixed Income Strategist and Vivek Paul, Senior Portfolio 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.

Drastic market moves in recent weeks – triggered by fears of the coronavirus outbreak and its economic toll saw sharp equity selloffs and government bond yield declines.


Weekly Commentary


One-month drift from equity benchmark in a 60/40 portfolio, 2006-2020

Article image 1 23032020

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 chart shows the rolling one-month move away from the benchmark weight of equities in a hypothetical 60/40 portfolio of 60% equities and 40% bonds. We use the MSCI World Index and Bloomberg Barclays Global Aggregate Bond Index to represent the two asset classes.


The coronavirus outbreak represents a major external shock to the macro outlook, akin to a large-scale natural disaster. Public health measures deployed to stop the virus’ spread are set to bring economic activity to a near standstill and cause a sharp contraction in economic growth in the second quarter. But we expect activity to ultimately return with limited permanent damage as long as authorities deliver an overwhelming fiscal and monetary policy response to bridge businesses and households through the shock.

The required policy response includes drastic public health measures to stem the outbreak – and a decisive, pre-emptive and coordinated policy response to stabilize economic conditions and financial markets. All this is starting to take shape. Central banks have cut rates and adopted measures to ensure markets keep functioning. The key here is to alleviate any dysfunction of market pricing and tightening of financial conditions. What is needed are overwhelming and coordinated policies – both on monetary and fiscal fronts – that forestall any cashflow crunches, especially among small businesses and households, that could lead to financial stresses and tip the economy into a crisis. The UK, Canada and Australia have served as models of policy coordination. We expect a third, significantly larger, fiscal package to emerge soon in the U.S. – likely reaching $1 trillion, or 5% of GDP – although there may be twists and turns as it makes its way through Congress.

Market Updates


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

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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 ocal 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.


Fiscal and monetary policy action to bridge the economic impact of the coronavirus is starting to take shape as the outbreak and related containment measures propagate across the globe. The policy response has been swift – and we expect total fiscal stimulus to exceed that seen during the global financial crisis. We believe market volatility is distracting from the sheer amount of stimulus being put in place – and there is more to come.

Week Ahead


  • Monday: Euro area flash consumer confidence indicator
  • Tuesday: Flash purchasing managers’ index (PMI) for the euro area, U.S., UK and Japan
  • Wednesday: German ifo Business Climate
  • Thursday: Bank of England rate decision; video conference of European Council members

Markets will focus on the PMIs as an indicator of the short-term impact of the virus outbreak. Eyes will also be on an unprecedented virtual summit by the Group of 20 economies (G20) this week, as well as a video conference by the European Union leadership, for signs of more concrete global policy coordination that has been lacking so far.


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