Market UpdateMarch 25 2020

Chief Investment Officer Update: 25 March 2020

1 min read

StJohn Gardner

Chief Investment Officer

Facing the enormous economic consequences of the unprecedented decisions of western governments to lock down significant elements of their economies, some of the most comprehensive fiscal measures ever seen in peacetime have been rolled out these last few days to cushion the impact on households, employees and businesses.

In tandem, and to stem the severity of the consequential market sell-off, the world’s major central banks have reacted with promises of enormous expansion of their balance sheets, as required to maintain a stable functioning global financial system. De facto – they have monetised the fiscal effort and provided the liquidity to allow businesses and institutions to sell assets and prepare cash war chests for those upcoming liabilities they may no longer be able to finance from trading income.

As a result, asset prices ebbed and flowed, broadly moving sideways as the news of economic help was digested alongside an accelerating COVID-19 death rate. The key question is whether the enormous and coordinated policy response will be enough to support markets on a more sustainable basis, thereby leaving the trough behind us, or whether, as I suspect, we will need to wait for the plateauing of the epidemic curves, and some clarity on the degree of damage done to the economies by the lockdown, before the markets can climb the slopes of recovery.