COVID-19 Roadmap: Past the worst, but recovery to be uneven

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
21 May 2020, 2:10 PM
Sectors Covered:
Equity Strategy and Quant

With isolation and stay-at-home orders across the US approaching previously announced deadlines, many investors are hoping that a reopening of the US economy will mark the start of a global recovery.

However, while turning off the economy was as easy as flipping a switch, reopening the economy may look more akin to a dimmer, as it is a far more complex and gradual process.

As major advanced economies are following Asia’s lead in easing containment measures, global activity has hopefully passed its trough. However, experience from China suggests that consumer demand is likely to be fragile for some time as people steer clear of shopping centres, restaurants and public transport.

The divergence among industries, in both the severity of declines and reopening progress, suggests not only that certain industries were hit harder than others as a result of this shutdown, but also that the reopening process will not be uniform across industries.

Steepest decline since WWII

Overall, we continue to believe that the global economy is currently experiencing the steepest decline since World War II, and that growth will remain muted throughout the remainder of the year as businesses partially reopen.

What may initially look like a V-shaped recovery seems set to lose steam, leaving activity below its pre-virus path for next two to three years.

Please refer to our recently updated list of Best Ideas, which are our most preferred sector exposures over the next 12 months.

More information

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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