Portfolio Manager Jeremiah Buckley says markets are likely to remain fluid as they track the global spread of the COVID-19 coronavirus. But over time, greater clarity about the virus and potential stimulus measures – along with the conclusion of the U.S. presidential election – could help revive the global economy in 2021.

  Key Takeaways:

  • In the coming weeks, we expect to see more market volatility as investors monitor the
    spread of the virus and evaluate economic stimulus introduced by policy makers.
  • In our view, global gross domestic product (GDP) growth is likely to be negatively impacted
    for the year. However, we also see potential for a strong rebound heading into 2021 as
    clarity about the virus and stimulus measures may release pent-up demand. In addition, the conclusion of the U.S. presidential election could remove another source of uncertainty.
  • Furthermore, we see minimal change to the outlook for long-term secular growth themes, including the rise of global travel, and believe companies with solid balance sheets and
    strong free cash flows will be able to weather near-term volatility.


We expect the coming weeks to bring more clarity on both the spread of the COVID-19 coronavirus and the duration of its impact on the global economy. While new cases are appearing globally, the latest news from China, the epicenter of the outbreak, is cautious optimism that the virus’ spread there is moderating. Indications from companies show a gradual reopening of retail stores and factories, potentially boosting consumption and restarting supply chains that are vital to economic output. We will closely watch these emerging signals and the actions of the central government to monitor the path of the Chinese recovery.

Potential stimulus to restart growth

As China appears to be moving toward the next phase in its battle with the virus, the country must focus on reinvigorating its economy, which has been significantly hampered by travel restrictions and shifting resources during containment efforts. The virus has caused a unique situation, restricting workers’ availability and closing businesses; therefore, traditional fiscal and monetary stimulus measures aimed at spurring demand will be more effective once normal business activities can resume.

As the virus spreads globally, other countries are bracing for the effects to their own populations and economies. In our view, global GDP is likely to be negatively impacted for the year; however, there are factors in progress that can potentially restart growth and provide more clarity as the situation progresses. For instance, central banks appear ready to provide valuable stimulus. The U.S. Federal Reserve recently took the rare step of cutting its benchmark federal funds rate by 50 basis points in between regularly scheduled meetings. Monetary stimulus globally could rekindle pent-up demand, as growth lost during the height of uncertainty may not disappear altogether, but rather shift to a later time period. A spurring of demand could also lead to replenishment of inventories that were already low as a result of the protracted trade war between the U.S. and China. Again, while uncertainty is high, the effectiveness of stimulus efforts may be hampered, but as we gain more clarity, the efforts made now could lay the foundation for future growth.

U.S. presidential election

To a lesser extent, the U.S. presidential election has also added to recent market turbulence. The emergence of Bernie Sanders, seen as less market-friendly than more moderate Democratic candidates, has concerned markets. As voters move closer to determining who will become the Democratic party nominee, and as the race eventually concludes in November, another source of uncertainty will be removed, further setting the stage for a potential rebound in growth.

Long-term implications

The possible scenarios for the duration and severity of the coronavirus outbreak make any definitive conclusions premature; however, we continue to believe in the longer-term outlook for powerful secular themes. For instance, we believe the trend toward cloud computing and Software as a Service (SaaS) solutions will be minimally impacted. An increase in electronic payments worldwide is another secular theme we believe will benefit from structural tailwinds for many years. While global travel has been one of the segments of the economy hit most severely in the short term, we think consumers have a short memory and that demand will eventually rebound. Companies with solid balance sheets and the ability to generate strong free cash flow may be able to weather near-term volatility and emerge in a strengthened position relative to their peers. We will continue to monitor the situation for permanent impairment of long-term growth, but as of now, we see minimal change to the long-term market outlook.