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The coronavirus continues to take its toll on economies and sharemarkets globally.
In the third session of our “Virus Crisis” webinar series, BetaShares Chief Economist, David Bassanese, provided an update on the impact, while Associate Director of Adviser Business, Alistair Mills, led the discussion on investment ideas for three market recovery scenarios.
The state of the virus
Source: Financial Times. As at 19 April 2020
The rate of daily increase in new cases appears to be at a peak for most major economies around the world, with Australia among the best of the developed countries outside Asia.
While infection rates in the UK and US appear to have flattened, we’re still waiting for clearer signs of a fall in these major economies, unlike substantial declines in South Korea and China.
Weak US Q2 GDP
Source: Federal Reserve Bank of New York
This chart provides an indication of GDP for each quarter. The significant decline in the early stages of April illustrates Q1 to be weaker than the GFC in 2008-2009.
With economists expecting June Q2 to be even worse – and markets appearing to count on a quick recovery – markets will likely face the biggest test in Q3.
US tech sector holding up in the sharemarket
Source: BofA Global Investment Strategy, Bloomberg
With the top tech companies accounting for one-fifth of the S&P 500’s market capitalisation, the shape of the recovery is heavily dependent on the fortunes of these companies.