Whatever the coronavirus has done to the global economy, the effects are likely to be fairly short-term – aside from in aviation.
At the start of 2020 we were convinced it would be a year of financial correction – a realisation of just how inflated financial assets (stocks and shares) had become, with high prices but earning close to zero returns. We expected clients to increase their allocations into alternative funds on the basis that these earn real, tangible returns from real assets, free from the madness of inflated stocks and shares.
Instead, the virus has completely overturned our expectations. Unlimited central bank liquidity, QE Infinity and interest rate repression mean financial assets have become even more inflated, while the value of real-world assets looks to be in serious trouble as recessionary fears threaten to crash whole sectors of the economy.
The market impact is unprecedented – to use a word that sums up this coronavirus age. We’ve never experienced anything like it. And we have few clues as to how it will develop. As we analyse our portfolio of alternative real assets, we are having to make all kinds of assumptions on how different economic sectors are likely to be affected in the long and short term by the virus and its effects on society. Don’t underestimate just how much individual behaviours are changing.
Two sectors of immediate concern are property and transport. Much has been written about the death of the high street and the end of the large office. However, it’s potentially a boom time for logistics and decentralisation in terms of smaller office branches and HQ hubs. There are opportunities, but also traps.