Answering your questions about market volatility
Q: Are we expecting another global economic recession? Will it be as bad as the Global Financial Crisis in 2008?
A: COVID-19 has made a global recession our base case. For example, our economists expect the US economy to contract -2% annualized in 2020, with growth contracting in each of the first three quarters before recovering in the fourth. Just that this time, it may happen in three quarters vs. six during the financial crisis.
Q: When will the bear market end?
A: There are still many unknowns about the length of time COVID-19 will impact the global economy. However, we still tend to believe that the impact of this epidemic is transient and different from previous economic recessions in nature. The decline of the stock market may have a short duration. Referring to the nine bear markets of the US equity market from 1950 to the present. Since the S&P 500 index recorded a 20% decline from its peak, it took an average of five and a half months to bottom out. However, the length of each bear market varied considerably. It ranged from four days as the shortest to over nineteen months for the longest.
Q: What is the investment outlook for 2Q?
A: PAM* is neutral on equity in the second quarter. We remain overweight on China and Hong Kong is slightly overweight. While Asia, Japan and the US are neutral, Europe is slightly underweight. Our current view for bonds is neutral overall. We prefer high-grade bonds with shorter durations.
PAM* refers to Principal Asset Management Company (Asia) Limited
Q: Should I take money out of the market now?
A: During volatile times, it can be tempting to change how you invest in hopes of a better return. However, in the long run, you may generally better off staying the course rather than trying to jump out of, then back into, the market.
Q: Should I adjust my investment portfolio?
A: What’s best for you really depends on your goals, risk tolerance, and how long it will be before you need to withdraw the money. Normal market has its ups and downs, but as an investor, it’s always good to use times like this to revisit the types of investments you hold. Asset allocation can help mitigate some of the risk of a falling market.
Investment involves risks. This information is for general reference only.