04 May 2020
Federal Reserve chair Jerome Powell's comments this week echo what our Chief Investment Officer Andrew McCaffery has been telling us for some time - that a quick V-shaped recovery is unlikely. Today we look at why that is, what governments and private firms can do to aid future recoveries, and why greater international cooperation is needed to avoid long-lasting damage.
- You can listen online with the player above, search for 'Rich Pickings' in your podcast app.
On sustaining the rally and likelihood of a V-shaped recovery
We're at a stage where the market's ability to keep building on this rally actually starts to find very little support from the reality of what's happening to the economy, but also to individual companies.
On the absence of international cooperation
The pace and size of intervention has been impressive but it has been primarily on an individual country basis or a distinct regional framework, in Europe's case. But you haven't seen that level of explicit coordination; making sure that all of the risks that permeate through a global system are being thought about and addressed. And so I think it is worrying because how do we get out from this? That needs you a synchronised growth, globalised approach. And neither of those looks likely.
I think that's where it goes back to different parts of society and even down to the individual - motivating them to want to be part of that significant recapitalisation process that will be required over time.
I think there has to be innovation around the thinking of governments and how they transition that process. It may be stakes that they take on in companies, that they effectively have interim nationalisation, that they provide discounted stakes back into the populations, that they incentivise them through savings vehicles, tax benefits. I think there's a variety of things - in regulation as well - that may lead to new products geared towards and named around current events.
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