Spotlight on coronavirus: After COVID-19

A closer look at the post-crisis world. We look at how to invest in a more indebted, less global, and more digital world.

We think that the post-crisis world will be more indebted, less global, and more digital. Investors will need to contend with higher taxation, financial repression, and moderately higher inflation, along with populism and protectionism, while navigating the transitions from global to local supply chains, and from physical to digital.

Key trends

Dive into our three key trends and discover what the world will look like after COVID'19.

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Where are we now?

Global financial markets have rebounded strongly from their March lows when fears about the COVID-19 health crisis peaked. For example, the S&P 500 index has risen more than 45% since then and has almost fully recovered to pre-pandemic levels.

While we believe elements of the COVID-19 story will continue to play an important role in determining asset prices over the next 12 months, other factors may increasingly come to the fore. These factors include the upcoming US election, US-China tensions, and the outlook for real interest rates and company earnings.

Central scenario

In our central scenario, we expect no renewed nationwide lockdowns. Moderate restrictions on activity should be sufficient to keep outbreaks manageable, with a vaccine widely available from 2Q 2021. This, combined with expansionary monetary policy and a moderate increase in fiscal stimulus, should allow for a rebound of economic activity to pre-pandemic levels by 2022. Against this backdrop, and with yields anchored close to record low levels, we think that the equity risk premium can normalize to pre-pandemic levels and would project the S&P 500 to trade at 3,500 by end June 2021. Our preferred investments for this scenario include dividend stocks, assets exposed to a 'green recovery', and select credit opportunities.

Upside scenario

In our upside scenario, we think a combination of earlier-than-expected vaccine availability, increased fiscal stimulus, status quo in US-China relations, and a 'benign' (from a tax and regulation perspective) outcome to the US presidential election would lead to equity risk premia falling below pre-pandemic levels, and we would project the S&P 500 to trade at 3,700 by end June 2021. Our preferred investments for this scenario would include select cyclicals and value stocks, and companies exposed to themes accelerated by the pandemic (such as digital transformation). We would also expect further dollar weakness.

Downside scenario

In our downside scenario, we would expect the S&P 500 to trade at 2,800 by end June 2021. We think that gold and the Swiss franc are among the best potential hedges for this scenario. In this scenario, investors would also need to look for opportunities to take advantage of volatility.










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Euro Stoxx 50
























USD IG spread


90 bps


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300-400 bps


USD HY spread


400 bps


550 bps


1,000-1500 bps


EMBIG spread


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USD 1,600-1,700/oz


USD 1,900-2,000/oz


USD 2,200-2,300/oz


House View positioning

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What will the world look like after COVID-19?

Key trend 1: More indebted

More indebted

Debt levels will be much higher

Debt levels will be much higher at the end of the current crisis. The precise fiscal spending picture remains unclear, but, given our current estimates, government debt as a percentage of GDP will be 15–25ppt higher by the end of 2021 than it was at the end of 2019 across much of Europe and in the US. This is broadly comparable with the scale of the increase seen between 2007 and 2010 as a result of the global financial crisis.


There will be regional variations in how governments finance this debt, but broadly we expect governments to use three means:

  • Financial repression
  • Higher taxation
  • Moderately higher inflation

Investment action

  • Financial planning
  • Re-assess cash and bond exposure
  • Seek alternative diversifiers

Explore our related articles for more guidance


Key trend 2: Less global

Less global

The world will be left less global

The COVID-19 lockdown has been an unprecedented experiment in extreme localization, with many individuals banned from even leaving their own homes. These measures will clearly not persist in the long term. However, we believe the world will be left structurally less global by the crisis, spurring on the de-globalization trend.


In a less global world, we would expect to see more of the following:

  • Populism
  • Protectionism
  • Localization

Investment action

  • Global diversification
  • Automation and Robotics

Explore our related articles for more guidance.


Key trend 3: More digital

More digital

Lasting changes from lockdown

Lockdown measures have forced many consumers and businesses to fundamentally change the way they buy and sell goods and services, and turn more digital. While we think most individuals and businesses will return to previous ways of working as lockdown measures are lifted, there will be some lasting changes.


It remains unclear how quickly consumers and regulators will regain confidence in the safety of the sharing economy but some lockdown consequences include:

  • Greater digital adoption
  • Less sharing
  • Health technology

Investment action

  • Digital transformation
  • Sector and stock diversification
  • Healthtech, genetic therapies, food revolution

Explore our related articles for more guidance.


Paul Donovan on After COVID 19

Our GWM Chief Economist Paul Donovan shares his views on the post-crisis world in a series of videos.

Digital economy

A less global world

Dealing with debt

After COVID-19

Dive deeper into the three key trends, consequences and our recommended investment actions.

How to prepare for a bear market

In light of recent events, here are some of the lessons we've learned about how you can prepare your portfolio and financial plan for the unexpected.

Unfortunately, history tells us that the quest for the perfect hedge may be a wild goose chase. No matter how well-intended or designed, the strategies that provide the most potent protection against equity downside risk also tend to be the most costly as they sacrifice long-term growth potential.

We typically recommend prioritizing cost-effective protection before moving on to less-reliable or costlier hedging strategies. Below are four “damage mitigation” strategies, in declining order of efficiency.

1. Think structurally

Make sure that your portfolio is taking the right amount of risk in order to meet your short- and long-term objectives. If those objectives appear in conflict, the Liquidity. Longevity. Legacy.* (3L) framework may help ensure that your portfolio can meet both sets of goals.

The 3L framework starts with the Liquidity strategy, which is designed to provide needed cash flow over the next 2-5 years, securing your ability to hold risk assets during a downturn.

The Longevity strategy is constructed to include all assets and resources needed for the rest of your life, clarifying what your future spending objectives will likely cost.

The Legacy strategy comprises assets in excess of what you require to meet your own lifetime objectives, clarifying how much your family can do to improve the lives of others now or in the future.

2. Plan strategically

The most direct way you can manage equity risk is to trim some stocks from your portfolio in favor of a higher allocation to government and municipal bonds. With that said, large changes in your portfolio’s allocation should only be made rarely and proactively.

By contrast, we don’t recommend jumping into or out of the market based on short-term forecasts—emotions tend to trump reason once markets become volatile.

We believe it is particularly important to hold well-diversified portfolios during late-cycle environments. Although somewhat-concentrated portfolios can work very well during bull markets, less-diversified portfolios are fragile, exhibiting larger drawdowns and longer recovery times in bear markets.

3. Consider hedges

Many strategies could mitigate your portfolio’s downside exposure if used to replace part of your equity allocation. You can also consider a systematic allocation strategy, hedge funds, or structured notes that accept limited upside in return for explicit downside protection.

In general, we prefer hedging positions that provide meaningful downside protection during a bear market, but don’t cost too much if the bull market continues. These include long-duration bonds, regime-shifting strategies that can cut equity positioning substantially, and certain structured products that cap downside exposure.

As a general rule of thumb, the more perfect a hedge is, the more costly it becomes. If you find something that seems to be an exception to this guideline, tread carefully—it may be too good to be true.

It’s important to remember that downside protection is less important for meeting long-term goals than it seems. Don’t sacrifice too much upside to protect against temporary losses.

4. Manage liabilities prudently

If used carefully, debt may greatly benefit bear market returns. The capacity to borrow can help you avoid selling at bear market prices and can vastly amplify return potential in the first stages of a recovery period. But, if used imprudently, debt can be ruinous.

Debt can be segmented into two categories: strategic debt— generally longterm and helpful for maintaining diversification and flexibility on a balance sheet—and tactical debt—used opportunistically on a short-term basis to improve outcomes. Make sure you manage both carefully to avoid being caught off-guard by a market decline or unexpected liquidity need.

A note of caution: Borrowing costs have increased commensurately with interest rates. Investors should have a plan to pay down debt when markets are healthy. This, along with consolidating assets to increase availability and improve borrowing terms, can help make sure that borrowing capacity is available during bear markets.


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