EN United States Institutional
Macroeconomic & Geopolitical

Looking Through the Pandemic

15 April 2020 - 3 min read

Confusion, uncertainty and snap responses to the coronavirus have created an environment that leads to more questions than answers. Because some previous tendencies will likely speed up while others slow down, here are three trends investors should watch in the months ahead.

The sudden shock of the pandemic and the hurried reactions of monetary and fiscal authorities have created a wide range of possible outcomes in the near term. The nature of the current environment is likely to produce imprecise forecasts, leading to an uneven road to recovery. However, there were many longer-term trends in place prior to the outbreak that are worth exploring. Some of these will accelerate or decelerate after the pandemic, but let’s focus on three trends we think will be important for investors to keep in mind.

De-globalization: The trend toward de-globalization was evident prior to the pandemic as nationalist and populist movements gained momentum around the world; the exongenous shock of the coronavirus is likely to create even more national self-reliance. A lack of global coordination has been eye-opening as the bulk of the pandemic response has been largely country-centric. Granted, governmental authority is contained within borders, yet the proliferation of travel and transport allowed the health threat to move rapidly across the globe. Moving goods and people may be more cumbersome in the future. As countries circle wagons and 

"Calamities tend to elicit tribal emotions such as fear and greed, and the autopsy of this current episode may create a more contentious atmosphere."

take care of their own people first, it remains to be seen how this natural reaction carries over into the post-pandemic world. Economic nationalism may be a theme we hear more about after the crisis subsides. Calamities tend to elicit tribal emotions such as fear and greed, and the autopsy of this current episode may create a more contentious atmosphere. While the Euro area has pooled its monetary system, it still needs to figure out if its fiscal system will follow suit. Relations with China may get worse. The potential for increased resentment or a call for reparations for economic damage incurred could change the social mood toward globalization.

Re-orienting Supply Chains: The trend toward lower cost, more efficient, just-in-time inventory management global supply chains appears to be increasingly vulnerable. It is likely more companies and governments will assess the risks of global supply chain disruptions and move more means of production onshore. The pandemic exposed how ill-prepared many governments, companies and individuals were. While this crisis is likely the extreme tail event that falls outside normal confidence intervals, it does highlight areas that are unprotected and need to be reassessed. For the U.S. government, there is likely to be a move toward onshoring production of certain medical supplies and pharmaceuticals. We could expect to hear more about these initiatives from a national security standpoint. Business models requiring component sourcing from multiple locations will likely revisit those sources to ensure companies have an adequate alternative supply or desire more direct control over key/vulnerable components.

Consumer Behavior: The parabolic rise in jobless claims and sheer nature of the shock means households are likely to be more cautious. The economic effect manifests itself in higher savings rates, which implies lower or slower consumption growth. However, other trends may see their rates of change increase. Social distancing and the discouragement of public gatherings may have some spillover impact on existing habits. Changes in work practices may accelerate. The work from home environment may persist as it relates to functions with little need for personal interaction. It may be more economical to have interactive positions in smaller office locations designed to enhance collaboration. Environments for more vulnerable populations, such as the elderly, may need to be re-examined, including a rethinking of nursing homes designs, or more adequate home care solutions. The benefits of technology, in the form of e-commerce, online learning and enhanced connectivity, are becoming more apparent and likely to extend beyond the re-opening of the economy. A renewed interest in health and wellness may carry over as well. With the deluge of information about the pandemic and various hygienic measures to maintain wellness, the benefits can extend beyond the individual. When people rally together for a common cause, the trend of rising social responsibility may also increase. The global nature of the crisis can bring home the fact that local actions can have global consequences—for bad and good.

Beyond these three trends, entirely new habits and patterns may develop, too. Although this spring season hasn’t felt like a new beginning, investors who don’t lose sight of longer-term trends may be able to better navigate markets hampered by near-term uncertainties.

Any forecasts in this material are based upon Barings opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Investment involves risk. The value of any investments and any income generated may go down as well as up and is not guaranteed by Barings or any other person. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Read More Less

Any investment results, portfolio compositions and or examples set forth in this material are provided for illustrative purposes only and are not indicative of any future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this material No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of investments. Prospective investors should read the offering documents, if applicable, for the details and specific risk factors of any Fund/Strategy discussed in this material.

Barings is the brand name for the worldwide asset management and associated businesses of Barings LLC and its global affiliates. Barings Securities LLC, Barings (U.K.) Limited, Barings Global Advisers Limited, Barings Australia Pty Ltd, Barings Japan Limited, Baring Asset Management Limited, Baring International Investment Limited, Baring Fund Managers Limited, Baring International Fund Managers (Ireland) Limited, Baring Asset Management (Asia) Limited, Baring SICE (Taiwan) Limited, Baring Asset Management Switzerland Sarl, and Baring Asset Management Korea Limited each are affiliated financial service companies owned by Barings LLC (each, individually, an “Affiliate”).

NO OFFER: The material is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument or service in any jurisdiction. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This material is not, and must not be treated as, investment advice, an investment recommendation, investment research, or a recommendation about the suitability or appropriateness of any security, commodity, investment, or particular investment strategy, and must not be construed as a projection or prediction.

Unless otherwise mentioned, the views contained in this material are those of Barings. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Individual portfolio management teams may hold different views than the views expressed herein and may make different investment decisions for different clients. Parts of this material may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this material is accurate, Barings makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information.

Any service, security, investment or product outlined in this material may not be suitable for a prospective investor or available in their jurisdiction. Copyright in this material is owned by Barings. Information in this material may be used for your own personal use, but may not be altered, reproduced or distributed without Barings’ consent.

20-1146233

X

We use cookies on our website to provide you with the best experience. By proceeding to our site you agree to our Cookies Notice and our site Terms and Conditions.