Global investors navigate virus data fog
LONDON: For money managers, it’s bad enough watching the coronavirus wipe trillions of dollars off world markets’ value. Even worse is not knowing how bad the outbreak really is for the economy, company balance sheets, and in turn for their portfolios.
Having torn across borders to almost 100 countries in the space of a few weeks, the virus is leaving official data releases and corporate trading statements struggling to keep up. That means many fund managers and economists who typically use forecasts to guide investment decisions or strategy calls are disregarding them altogether.
In short, investors, a group that hates uncertainty, are groping their way through what is the worst stock market rout and growth scare in years.
Government and business efforts to contain the virus are expected to wreak the most economic damage; those responses are ongoing and asymmetric and subject to constant change as the virus threat shifts. All of this is making it much harder to forecast the hit to growth or profits.
Nor are central bankers’ signals much use, given monetary firepower is more or less exhausted after a decade of deployment, said Paul O’Connor, head of multiasset at Janus Henderson Investors, which runs $370 billion.
“Economic data are not going to be much use at all. We face at least a month, some more weeks of weak economic data, downgrades to growth and downgrades to company earnings. Data won’t tell me where the market may bottom,” O’Connor said.
“Nor is there a clear circuit-breaker where policymaking is concerned.” Instead, O’Connor is using market moves to gauge when to buy or sell-on Monday when the S&P 500 and Europe’s STOXX index suffered their biggest daily falls since 2008, he stepped in to buy, reckoning sentiment was near bottom.
As for economic data, that’s getting short shrift. February US payrolls, which last week showed robust job creation and unemployment near 50-year lows, were brushed off by a plunging Wall Street that - quite simply - saw the numbers as old news.
February Purchasing Managers Indexes (PMIs) - considered one of the few forward-looking economic indicators available - showed euro zone businesses growing at their fastest pace in six months; even compiler IHS Markit dubbed them “a false dawn”.
Meanwhile, economic forecasts roll inwith caveats attached. Oxford Economics (OE) cut its 2020 global growth forecasts by a half percent on Monday, assuming a Chinese bounceback. But this hinged on “the extent to which households and firms are able and willing to go about their normal business”, it added. — Reuters