Balancing Risks and Opportunities as the Pandemic Accelerates
By Celestee Tan
During this period of uncertainty, It is crucial to maintain an investment philosophy that includes maintaining a well-balanced diversified portfolio and avoid the temptation to rapidly change allocations.
Citi analysts have further revised down GDP projections for 2020. Global GDP is now seen contracting by 1.6% YoY (-2.9pp). Advanced Economies are projected to contract by 3.6% YoY (-3.8pp) and Emerging Markets, while positive, have also been revised down to 1.1% YoY (-1.9pp) in 2020.
The shock to the global economy due to the economic, social and health impacts of COVID-19 are significantly impacting markets globally. While a larger negative impact on markets may be expected near-term, Citi analysts believe that long-term investing can create investment results for investors. Market timing can be especially damaging to long-term returns in periods of instability like what is seen currently.
Incoming data at the end of 2019 were favourable in supporting a modest upturn, with leading indicators of sentiment turning up. The rapid spread of COVID-19 outside China in recent days represents a substantial new challenge to the global economic outlook.
A surge of COVID-19 infections outside of China, where the disease was first reported, has weighed on investor sentiment in recent days over its potential impact on economic growth and earnings. A more volatile market backdrop is seen in the period up ahead.
There remains a lot of uncertainty and volatility in markets can be expected. However, Citi’s Global Investment Committee has decided to remain overweight equities in a globally diversified portfolio as regional markets seem likely to recover within a 12-18 month allocation window.
