Equity markets fell precipitously in March as the spread of COVID-19 became apparent. National governments responded to the pandemic by ‘locking down’ their economies in an attempt to contain the spread of the virus and prevent their health systems from being overwhelmed.
The placing of the majority of the global economy into a form of suspended animation is unprecedented and has created significant financial and economic stress. Policy makers responded appropriately. Central banks injected significant liquidity into the system while national governments took steps to support household and corporate balance sheets. The significant policy response led to equities recouping some of their losses.
We’ve written before about our unscientific, but hitherto wholly accurate, ‘muddle-through’ philosophy. Even in the depths of the global financial crisis, when investors could have been mistaken for thinking the sky was falling, we stuck to this tenet. While times were undeniably hard, the rhythm of daily life continued much the same as before. This is different. Coronavirus’ impact is not limited to the financial realm, significant as this will be, but will influence how society is structured and people behave. In recognition of this uncertainty we have retained significant flexibility in order to respond to opportunities as they evolve.