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Coronavirus: A Moving Target

Mar. 02, 2020 10:41 PM ET
Neuberger Berman profile picture
Neuberger Berman


  • While the coronavirus (COVID-19) outbreak appears to be easing in China, it is gathering speed in the rest of the world.
  • We think lost output and earnings will be recovered, but expectations for containment of the outbreak and a short hit to Q1 growth alone are too optimistic.
  • While it won’t insulate the economy completely, the virus may give political cover for the fiscal stimulus the economy needs to extend the current cycle well into 2021.
  • The signs that we face a tough second quarter for earnings are growing, as guidance is pulled or downgraded.
  • There may be too much policy easing priced into rates and bond markets, but not enough economic disruption priced into high yield and equity markets - more volatility is likely before the recovery arrives.


If you haven’t reduced risk, it’s probably not too late to do so; if you are already conservatively positioned, it may be too early to buy the dips.

As I put this edition of CIO Weekly Perspectives on paper first thing Friday morning, a brutally fast market correction has served to remind us that the coronavirus outbreak is a rapidly moving target.

On the one hand, last week confirmed that the Chinese authorities’ aggressive interventions are taking effect. The daily tally of new cases of coronavirus (COVID-19) began to slow, and both anecdotal evidence and responsive data such as shipping and utility usage showed China slowly getting back to work after weeks of operating at 50% capacity.

At the same time, however, the number of cases in the rest of the world overtook the number in China. Within days, Italy had reported more than 600 cases. That is concerning because the vast majority cannot be linked directly to China. As the European Centre for Disease Prevention and Control (ECDC) warned, this suggests similar levels of infection could become evident across Europe over the coming days and weeks.

A month ago, Erik Knutzen concluded that things were too uncertain to justify big asset allocation decisions. Things are still moving fast, but they have certainly moved enough for us to update our investment views. Brad Tank, Erik Knutzen, Health Care Research Analyst Terri Towers and I did so in a webinar for clients last Wednesday.

The headlines are that we think lost output and earnings will be recovered, but that the expectations for containment of the outbreak and a short hit to first-quarter growth alone - the prevailing view among market participants as recently as a week ago - were too optimistic.

With the caveat that Friday’s market is still ahead of

This article was written by

Neuberger Berman profile picture
Neuberger Berman, founded in 1939, is a private, independent, employee-owned investment manager. The firm manages a range of strategies—including equity, fixed income, quantitative and multi-asset class, private equity and hedge funds—on behalf of institutions, advisors and individual investors globally. With offices in 23 countries, Neuberger Berman’s team is more than 2,100 professionals. For five consecutive years, the company has been named first or second in Pensions & Investments Best Places to Work in Money Management survey (among those with 1,000 employees or more). Tenured, stable and long-term in focus, the firm has built a diverse team of individuals united in their commitment to delivering compelling investment results for our clients over the long term. That commitment includes active consideration of environmental, social and governance factors. The firm manages $323 billion in client assets as of March 31, 2019. For more information, please visit our website at www.nb.com.For important disclosures: https://www.nb.com/disclosure-global-communications  Contact Us: Advisor Solutions (877) 628-2583 advisor@nb.com RIA & Family Office (888) 556-9030 riadesk@nb.com

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