Market NotesChristopher Peel, CIO of Tavistock Wealth - 23rd March 2020
Christopher Peel, CIO of Tavistock Wealth – 23rd March 2020
This is extraordinary given that this is not a financial/banking crisis, but a short-term collapse in demand resulting from government-imposed quarantine measures. Objectively, there are two diametrically opposed global events playing out at the same time, the spreading coronavirus and a collapse in the oil price. This has caused panic selling of equities and a flight to safe-havens such as the US dollar, G7 government bonds and gold.
“The spread of the COVID-19 coronavirus outside of China is gathering pace and cases have now been reported across more than half of the world.”
The spread of the COVID-19 coronavirus outside of China is gathering pace and cases have now been reported across more than half of the world. As of now, there is no cure, but mercifully the recovery rate is estimated to be circa 98%.
Furthermore, scientists all over the globe are working around the clock and I would speculate that these clever minds, with the support of the World Health Organisation and government officials will come up with a solution in a timely manner. Drugs are already being tested and hopefully they will be effective. The impact of quarantined areas will certainly reduce economic growth in the short-term, but central banks have reacted quickly by slashing interest rates and pumping huge sums of liquidity into the system in an effort to cushion the blow. Governments throughout the world have also pledged trillions of US dollars in fiscal aid to soften the economy slowdown. Similar outbreaks such as SARS, Ebola, Swine Flu or the Zika virus suggest that the sell-off in equities will be sharp and short-lived, followed by an equally strong recovery. This is what we expect to happen in the second half of the year.
“Earlier in the month, the OPEC cartel failed to reach an agreement on supply cuts, which has caused a plunge in the price of Brent crude oil from $50 to $25 per barrel.”
Earlier in the month, the OPEC cartel failed to reach an agreement on supply cuts, which has caused a plunge in the price of Brent crude oil from $50 to $25 per barrel.
In the very near future, this steep fall will act as a huge economic stimulus in countries that import oil such as South Korea, China, India, Japan and most of Europe. The losers will be the Middle East region, Brazil, Mexico, Canada and the shale industry in the US. The net effect is positive for the global recovery and will offset some of the downturn stemming from the spread of the virus in China. It is difficult to predict when the price of oil will stabilise, but the longer it stays at the current levels, the better chances of a quicker recovery from the impact of the virus.
“Our positioning until last week had been little changed since the beginning of the year.“
Our positioning until last week had been little changed since the beginning of the year. We believe the economic impact from the virus will last between 1 and 2 quarters. A drop in global GDP over a short period of time will not come as a surprise to investors given the extent of the quarantine measures enacted around the world. However, the coordinated central bank interest rate cuts, fiscal spending measures by governments and the lack of leverage in the financial system will ultimately lead to a return to normality in the very near future. As a result, we have tilted equity exposure in favour of oil importers, healthcare and technology. We have also trimmed positions in high yield and emerging market bonds and increased cash levels to a minimum of 10% across the portfolios for liquidity proposes.
Chief Investment Officer
Sadly, it is unclear if the proposed course of actions will stop the rampaging virus.
However, it is already evident that the economic damage caused by the lock-down will bring catastrophic hardship to millions of people around the world. I remain an optimist and strongly believe that the combined efforts of central banks, government officials, scientists and warmer weather will bring an end to this madness within months. Equities are cheap, bonds are expensive, and liquidity is king.
THE HOUSE VIEW REMAINS UNCHANGED:
THE WORLD IS NOT COMING TO AN END!
WATCH THE INTERVIEW ON CNBC BELOW:
This investment Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person. Source of data: Tavistock Wealth Limited.
Want to know more about the Equity Markets?
Please contact us here:
Those stocks that outperformed during the corona crisis are the same ‘winners’ that outperformed before the crisis.
The recovery in US equity prices, from the corona crisis, has been one of the most rapid in history.
China’s economy has transitioned, from an industrial export-led model, towards services.
Commodities are nothing if not cyclical. They rise and fall in value with remarkable consistency over time.
Quantitative easing, or QE, is where a central bank creates money to buy bonds. The goal is to keep interest rates low and to stimulate the economy during periods of economic stress.
In January 2019 Jerome Powell pivoted from a policy of interest rate increases and balance sheet cuts to interest rate cuts and, later that year, balance sheet expansion.
Over the last decade, the Fed has increasingly resorted to unconventional monetary policy, such as quantitative easing, or QE, to stimulate the economy.
Flying the global economy into the ground from 35,000 feet will go down as one of the most difficult and controversial decisions in the history of mankind.
In response to the corona crisis, global central banks have unleashed a tidal wave of liquidity.
Tavistock Wealth is the investment management arm of Tavistock Investments Plc. The investment team is comprised of 7 highly educated and talented professionals.
One question I get from advisers and clients, more than any other, is why global equity markets have bounced back so far.
In the early stages of the Corona Crisis of 2020, the global economy faced a liquidity crisis.
In an unprecedented day in the history of oil trading the price of the front month contract for West Texas Intermediate (WTI) oil fell below zero to -$37.63.
Earth Day, commemorated each year on 22/04 by more than 1bn people, is the largest annual secular observance in the world.
The global economy has been plunged into a deep recession as government leaders struggled with the difficult question of how to deal with the COVID-19 coronavirus.
As the world’s reserve currency, the US dollar is the go-to currency. It is used to price assets, complete transactions and as a store of value.
The COVID-19 coronavirus is a demand shock on a global scale where the economy slows to a crawl, but the overhang of debt remains.
The coronavirus has brought economic activity to a virtual stand-still and transformed a strong global economy, with lots of debt, to a weak economy… with lots of debt.
Last week, we considered the debt story behind the coronavirus. The fear of a large debt overhang, as the economy slows, led to concern that households and companies could start to default on their debt.
Our Chief Investment Officer Christopher Peel joined CNBC to discuss his views on market volatility as a direct result of the coronavirus pandemic.
In the past week, global equity markets have fallen again and yields on developed market government bonds have collapsed even further.
Today, global equity markets have fallen again and yields on developed market government bonds have collapsed even further. In my opinion, there are two diametrically opposed events playing out at the same time.
This is a time to remain calm, patient and focused on fundamentals whilst relying on sound risk management practices. Over the last week the number of confirmed cases of COVID-19 has risen to more than 83,000 people across 50 countries.
Ironically, the turning point may have been President Trump’s withdrawal from the Paris Agreement on climate change in 2017 that set the tidal wave of “doing the right thing” in motion.
2019 was the year in which ESG investing joined the mainstream and became the “new normal”.
Environmental, social and governance (ESG), a byword for sustainability, has in recent weeks occupied rarefied real estate on the landing page of several finance industry titans.
Welcome to the Q1-2020 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.
The Dawn of a New Era for UK’s Economy.
The polls have become notoriously unreliable and nothing can be taken for granted ahead of Thursday’s general election.
Speaking to CNBC, Christopher Peel discusses the upcoming UK general election, sterling and UK equities.
Christopher Peel, chief investment officer at Tavistock Investments, says Brexit is the big focus for investors this week when it comes to Europe.
Welcome to the Q4-2019 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.
Chief investment officer at Tavistock Investments, says the trade war is hurting both the U.S. and China. Christopher Peel discusses with CNBC.
The ongoing China-US trade war, the potential of another Fed interest rate drop and the continuation of the current bull market. Christopher Peel discusses all of this with CNBC.
Christopher Peel provides his views on global financial markets for the second half of the year on CNBC.
Welcome to the Q3-2019 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.
Recent news events have brought to light the risk of suspended funds and the unhappiness these restrictions can cause for investors.
Christopher Peel discusses what’s coming next in global financial markets in a recent interview on CNBC.
Christopher Peel gives his views on global financial markets…
Welcome to the Q2-2019 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.
Speaking to CNBC this morning, Christopher Peel covers current market views and monetary policy, along with the global risk environment and the ongoing Brexit debacle.
Speaking to CNBC Christopher Peel discusses the next steps for Brexit negotiations.
Christopher Peel gives his views on global financial markets and Tavistock Wealth’s portfolio positioning on CNBC.
Welcome to the Q1-2019 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.
Christopher Peel, our Chief Investment Officer, discusses the environment in U.K. investment before Brexit deal on CNBC.
Tavistcok CIO Sees a good Environment to Be Long Risk Assets.
Christopher Peel talks about Brexit and its potential impact on Sterling.
The average client invests for the medium to long term. Of course they’ll experience ups and downs, but the aim is always to increase the value over time, right?
Speaking on Bloomberg, Christopher Peel discusses the recent decline in the price of oil and the potential impact on U.S. High Yield
Welcome to the Q4-2018 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.
Earlier in the week, US equities suffered their worst declines since February 2018.
Christopher Peel talks about Brexit & Sterling and the Bear Market in Bonds on CNBC.
Christopher Peel gives his views to Reuters and Morningstar on Global financial Markets.
Christopher Peel speaks to Daybreak Europe’s Markus Karlsson about why he’s long-term positive on the trade story, and about the state of affairs at the Federal Reserve, after Wednesday’s Fed minutes.
Christopher Peel provides his quarterly perspectives for Q3 2018 on CNBC.
Welcome to the Q3-2018 ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the rest of the year.
Christopher Peel, CIO at Tavistock Investments, says…”I think we are getting to the end of a Long-Bull market”.
It has been a volatile start to 2018 and much of January’s gains in global equity markets have evaporated. The overdue correction, forecasted during the last two years, has finally occurred.
Christopher Peel, CIO at Tavistock Investments, says…”There has been no stock correction in past few days….”
Welcome to the inaugural ‘Quarterly Perspectives’ publication, which aims to explain our outlook for financial markets over the coming year.