World's Biggest Investors Fear Second Virus Wave Will Derail Stock Rallies --Financial News
May 22 2020 - 6:20AM
Dow Jones News
By David Ricketts and Shruti Tripathi Chopra
Of Financial News
Some of the world's biggest investors are worried that a second
wave of coronavirus could derail the global stock market recovery,
with many anxious about further lockdowns being put in place as a
result.
A poll of global investors, which manage more than $17 trillion
collectively, found that 70% of hedge funds and long-only investors
are "somewhat worried" or "very worried" about another outbreak of
the disease, which has so far killed more than 320,000 globally and
caused near economic paralysis.
Respondents to the survey, conducted by online opinion sharing
platform Procensus, also put a 34% probability on their region
entering full lockdown again. The poll found that 34% are now
prioritizing data signals on infection rates and a second wave of
Covid-19 cases, over news of a vaccine being developed.
More than 30% of investors said they don't expect a vaccine to
be ready on a global scale until 2022 at the earliest. However,
others are more optimistic with 22% expecting a vaccine will be
available by the second quarter of 2021.
The Procensus poll comes as market commentators forecast a bumpy
ride ahead for investors over the coming weeks, despite the S&P
500 recovering more than 30% since its low on March 23 and FTSE 100
stocks also making gains.
Central banks and governments have acted quickly to provide
stimulus since the Covid-19 outbreak, taking unprecedented steps to
support businesses and announcing giant bond-buying programs. That
helped support equity markets leading to an uptick from the lows of
March.
However, Procensus found investors' economic expectations have
deteriorated since its last poll, anticipating a cumulative fall in
nominal GDP of 10.1% compared to 9.6% on March 26.
Just under 60% of investors said they are "somewhat bearish" or
"very bearish" on global equity markets over the next three
months.
The outlook chimes with a recent fund manager survey from Bank
of America, where 68% said the market was experiencing a bear
rally--where stocks post short-term gains during a period of
longer-term decline.
"The truth is that no-one knows what is coming next, in terms of
how the easing of the lockdowns will pan out, how consumers will
react, how corporations may or may not benefit and how the overall
economy will do," said Russ Mould, investment director at online
platform AJ Bell.
"It would be an unusual bear market that did not see a further
dip, or even a re-test of the prior lows," he added.
Despite some recent signs of recovery, former Bank of England
deputy governor John Gieve said markets had underestimated the full
impact of Covid-19.
"The strength of equity markets is a puzzle in terms of economic
fundamentals," said Mr. Gieve, who was at the Bank of England
between 2006 and 2009 during the height of the financial
crisis.
"They seem to be assuming a rapid recovery starting in Q3. That
is possible but seems unlikely."
Mr. Gieve predicted the economy might not recover to pre-Covid
levels until 2024.
"We really can't know whether we have seen the worst and will
see the pandemic subside for the rest of the year and then
disappear in the face of an effective vaccine," he said.
"It seems equally probable that we will have to live with social
distancing for several years with all that means for transport,
entertainment and the wider economy."
Agnes Belaisch, chief European strategist at Barings Investment
Institute, said market watchers are "looking for an economic
indicator of where the economy will be one year from now."
She added: "Part of the economic data being released is still
about Q1 and the upcoming ones will describe a second quarter when
consumers-workers stayed at home. The second quarter will be
terrible in terms of data, reflecting no economic activity."
Website: www.fnlondon.com
(END) Dow Jones Newswires
May 22, 2020 06:05 ET (10:05 GMT)
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