Assessing the spread of the disease and responses to it

In this updated piece, Invesco’s Global Market Strategy Office reviews the macro, market and policy impacts of the coronavirus phenomenon.

The rise of economic lockdowns has significantly reshaped the global macro environment, beginning first with concerns over depressed consumption to today where we observe widespread economic distress resulting from extensive and widespread government actions. Our base case in the US relies on the assumption of economic lockdowns lasting no longer than three months. In this scenario, we expect a recovery to take place beginning after the lifting of lockdown orders, first registering a recession followed by a budding recovery to make for a U-shaped path for growth. This recovery is dependent on the health of the consumer coming out of this crisis, specifically the duration and permanence of layoffs and any debt build-up on household balance sheets, and the ability of companies to remain solvent for the duration of the crisis.

In this environment, we are focused on the following points:

• Countries have ratcheted up their lockdowns as new infections exploded in each country. We expect that a significant and sustained downtrend in infections will spell the beginning of the end to economic lockdowns.
• Our base case is for a U-shaped recovery following the end of economic shutdowns, though this presumes shutdowns last no longer than about three months.
• Markets have suffered meaningfully, and we are watchful of renewed pressures on global markets, especially in debt.
• Widespread and substantial fiscal and monetary policy across the globe have stabilized global economies, but we suspect more stimulus may be necessary, especially if lockdowns persist.

To learn more, download the slides.