• Global economic news is catastrophic: one statistic sums it up; over 3 million US people filed unemployment claims in a single week – 5 times the peak during the Global Financial Crisis (GFC).
• Central banks have undertaken unconventional measures: the Fed has eased the global dollar shortage, and intervened in the corporate bond market for the first time.
• None of these measures will prevent the recession – we are already in it, but they should ease the pain and support the recovery.
• Financial markets will have to face huge cuts in corporate earnings, with dividends being suspended or cut. Share buybacks, the biggest source of demand for US equities, will stop.
• Where to next?
o News flow and markets to remain highly volatile
o Sharp rallies are the norm in bear markets
o The task now is to restore value in client portfolios
o Equity and credit offer value if you hold your nerve
o Resist the temptation to sell low and buy high!