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GDIM Investment Market Review & Outlook | April 2020

As the spread of the Coronavirus continues across the US and Europe, every day brings new data. We have seen some encouraging signs of slowing contagion in Italy and a return to growth in some parts of the Chinese economy, but the battle to contain the spread and protect the vulnerable is still ongoing. Arguably, the US is the most influential region to be affected by the virus, and the situation there has yet to unfold. With this potentially disruptive cloud on the horizon we must remain cautious and continue to carefully observe the developments.

As noted above the Chinese economy is showing positive progress in both official and unofficial measures but as an economy that is reliant on trade with the West, we cannot foresee a significant move toward full capacity in the near future.

The proactive measures that have been put in place by central banks and governments around the world should help to mitigate the worst effects of the economic downturn. We fully expect to see more of these stimulus measures in the near future. One of the more unusual aspects of the policies being introduced by some governments is the support given to businesses in order for them to furlough their workforce, which effectively pays them not to work.  We normally see these supportive measures put in place to encourage activity, not the opposite. This is absolutely the right course of action, but it means committing substantial resources to solve a short-term issue to prohibit a stall in spending as well as a rise in unemployment and ensure that businesses can continue to trade after the inactive period.

The human and social impact of COVID-19 has been devastating and puts into perspective the sometimes hyperbolic headlines we are currently seeing regarding lower corporate activity, revenue or growth. As the firm responsible for the stewardship of your capital, we must address the new environment that faces us and react to the ever-changing challenges that occur. However, we know that these difficult times will pass and we expect that there will be more potential for a bounce-back in the third and fourth quarters of this year.

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