Asset managers speaking in our recent article on US equities gave views ranging from hostile to cautiously optimistic about the Federal Reserve’s stimulus package following the outbreak of the coronavirus pandemic.
Eric Lascelles, chief economist at RBC Global Asset Management, said he believed the rate cuts, fresh quantitative easing and fiscal stimuli “may manage to deliver an economic boost worth around 1.5ppt [percentage points] of global GDP”.
He added: “This is theoretically large enough to plug the great bulk of the hole created by the virus. However, the virus hits growth very quickly, whereas stimulus engages with a lag.”
But there is also a view that the response from the US authorities has been counterproductive, our article – which appeared in the April issue of the magazine – found. Perhaps investors are simply too fatigued by Fed intervention and Trumpian rhetoric to take them seriously.
“So far, the actions of the Federal Reserve and Trump’s administration have done little to quell the fears that have gripped US society, economy and capital markets,” says Rebecca Chesworth, head of equity, sector and ESG strategies at State Street’s SPDR ETF business. “In fact, they have exacerbated the sell-off, created more panic, and put more downward pressure on the industries and stocks that have been hit hard the most; airlines, leisure, and energy.”
Other asset managers in our article included Giles Parkinson, manager of Aviva Investors’ Global Equity Endurance fund. Speaking about US corporate health, he said: “In our opinion, the underlying profitability and cash generation of most companies hasn’t changed materially, but many companies do not have the balance sheet to see them through to the other side of the recession that has already begun.”
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