COVID-19 has proved challenging for businesses—but opportunities have emerged, particularly for companies with business models built to capitalize on long-term structural trends. Dr. Ghadir Cooper shares her views on equity markets today and what to expect going forward.
Can you provide a brief recap on how COVID-19 and the related market volatility have affected equity markets in recent months?
When China started to report COVID-19 cases at the beginning of this year, much of our concern was centered on the impact of a sharp fall in demand from the country and the potential short-term shocks to the global supply chain. However, as the virus situation evolved into a global pandemic, and many countries imposed strict limitations on their citizens’ movement outside of their homes, what started as a supply shock morphed into demand destruction, throwing the global economy into a synchronized recession. As we know, markets started falling very quickly in response and companies started to conserve cash. Exacerbating the rout, oil prices fell significantly as a disagreement on supply cuts between OPEC and Russia took place just as global demand for oil was declining rapidly.
Longer term, we do expect to see demand begin to normalize as lockdown conditions ease and the global economy reopens—even if that comes in starts and stops. Against this backdrop, while we acknowledge the potential for short-term challenges, we believe market volatility can effectively create attractive opportunities to invest in businesses with solid long-term growth potential at more attractive prices. For bottom-up, active managers in particular, we believe these opportunities are rife across the equity markets, from developed to ASEAN and emerging markets, and from small-cap equities to larger stocks.