As of March 18, 2020, COVID-19 has continued to spread at a rapid pace around the world and has now been declared a global pandemic by the World Health Organization. This will cause a severe shock to the global economy, pushing it and most economies into a deep recession. Financial markets have responded with huge falls in equities, a rise in credit spreads and a flight to the safety of government bonds.
Governments and central banks will attempt to do whatever it takes to provide businesses and consumers with a bridge to the other side of the pandemic, so that both can take part in and contribute to a strong recovery. Whether these efforts succeed and how quickly the pandemic is brought under control will largely determine the path for financial markets.
We continue to monitor the situation, but at present, we do not have any strong views on the timing of any recovery, or even when this current volatile environment will end. We therefore remain neutral on risk markets in general, with a preference to hold cash, or cash-like investments, relative to defensive assets, as we deem traditional safe havens such as government bonds to be extremely richly valued at present.