Updated: Feb 28, 2020
SUMMARY. To reiterate, the panic that is ensuing regarding global growth is warranted for the near term, but may not last. We view the virus, as a TRANSITORY non-reoccurring event NOT and permanent force to reduce economic growth. If true it may come & go like other medical related crisis. Further as we said in our prior note: "Containment appears difficult and signs of a vaccine are potentially the signal for the world economy to resume growth."
INVESTMENT IMPACT. The following is word for word from our weekly commentary from last week: "Conservatism still reigns across our model portfolios as we maintain high cash/bond levels, in fact we reduced exposures further across the board in equities in our models. According to the WHO (World Health Org) in 3 weeks it will report results on 2 interim trials for the virus with existing drugs while development of a vaccine in underway. This maybe be pivotal in determining the direction of economy. Our overall our view is the impact of the virus may push out growth into 2H20 and additional stimulus from central banks may mute its long term impact." Thus, our view that global growth will gradually resume as we head through 2020 especially with the additional stimulus for growth already in place by central banks and possibly more to come. This hinges on signs of containment (less likely) AND/OR a vaccine or treatment that lowers death rate. As insurance, the dividend yield of over 3.5% across our model portfolios is by design in anticipation of a possible low return environment in 2020.
For more insights see our website and disclosures found there at BCA. As always contact us for further explanation of how these events can effect your finances.