Reflection, recession, recovery…

The world is currently looking very different but in these unique and challenging times, we continue to learn that in every crisis lies the seed of opportunity.

23 Jun 2020

3 min read


Barry Gill

Head of Investments

We can observe a further fracturing of global political trust and partnership despite the need for solidarity and knowledge sharing being greater than ever.


Six months ago, as we discussed topics for our year-end edition of Panorama, our investment team debated the most significant events that investors were unprepared for.

One colleague suggested we include global pandemic, having read Laurie Guttrie’s ‘The Coming Plague’. Indeed, in the years since the book was published, many luminaries had warned of the potential for a pandemic, and yet it is surprising how few investors were either positioned or prepared. We certainly didn’t think it was around the corner so it didn’t make our final list.

We were looking forward to utilizing the familiar playbook of resynchronizing global growth, which had given predictable results for over a decade. But a new paradigm was about to arrive.

As with most crises, what ultimately matters is how you equip yourself in the heat of battle. Does your investment process hold up? Are your operational practices resilient? In volatile and illiquid markets there are many ways to lose money.

While it is difficult to say that we have arrived in a new normal, we certainly now find ourselves in a world with lots of new information to digest.

We are witness to fiscal expenditures that normally only arise in wartime, despite no reduction in the productive asset base. We are seeing a downward conversion of US Treasury yields to the zero bound, not the upward convergence by other global sovereigns that seemed logical only last year.

We are witness to fiscal expenditures that normally only arise in wartime, despite no reduction in the productive asset base.

Technology growth stocks are benefiting from a ‘heads I win, tails you lose’ nirvana of tumbling discount rates and accelerated revenue growth. Rarely have investors been bombarded with so much change to so many drivers of investment decisions in such a short period of time, and for those that can process the implications of all this change and invest in the most dispassionate manner, the opportunities are potentially boundless.

In this edition, my colleagues take a deep breath and peer into the forecasting fog. Our Solutions team plots what a recovery might look like, and the factors that might hasten or hinder the return to growth, with a summary of how the pandemic has affected our five-year capital market assumptions.

Several of our portfolio managers discuss the relative merits and discrete opportunities of fixed income and equities. Our Emerging Markets team tests whether our long-held bullish stance on Chinese securities still holds water. And our Sustainability experts assess whether the burgeoning move towards climate and environmental awareness will be hijacked by governments’ urgent need to focus on economic recovery.

Although we still face uncertainty in how markets will perform over the next several months and years, our investment experts point out several opportunities they see across markets in different scenarios, and our Sustainability team can point to evidence that integrating sustainability into investment decisions has shown its worth throughout the recent volatility.

I trust you will find our mid-year update both informative and provocative. Please don’t hesitate to contact your UBS Asset Management partner should you seek further insight.

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