(London) – Aviva Investors, the global asset management business of Aviva PLC, expects that the containment measures imposed because of the COVID-19 virus will result in the deepest global recession of the post-war period. The medical shock is still evolving and growing; the scale of the economic shock has yet to be felt fully, but it will be unprecedented in depth.
The exact scale of the contraction is impossible to forecast with any accuracy given uncertainty around the evolution of the spread of the virus, the way in which governments and individuals respond to that through social distancing, the economic implications and the monetary and fiscal response to alleviate the situation. However, a decline in global activity of between 10 and 20 per cent in the first half of 2020 is plausible. While risks are tilted heavily to the downside in the short term, activity is expected to begin recovering quickly in late-2020 and early 2021.
The unprecedented monetary and fiscal policy response is a collective attempt to minimise lasting damage from the lockdowns and to try and ensure that resources can be redeployed when activity recovers; hopefully in the second half of 2020. But they can only cushion the blow – there will inevitably be some longer-term impairment.
In such challenging conditions, our investment strategies should aim to preserve capital and look for opportunities where balance sheets are strong and where good quality assets have been oversold.
Michael Grady, head of investment strategy and chief economist at Aviva Investors, said:
“We have increased our preference to be overweight government bonds, reflecting our view central banks will continue to act to maintain easy monetary conditions, and at the same time allow fiscal space to be created without higher yields. Our modest underweight equity allocation reflects our concern that economic weakness will translate into historically weak corporate earnings in 2020, which we do not think markets are fully discounting at this time.
We have moved to a more cautious stance in our currency allocation, with a preference to be long Japanese yen and short other Asian currencies. We have a neutral view across credit, where corporate bonds spreads have widened sharply, but where there is now significant support from central bank asset purchase programmes.”
A link to the full House View document can be found here.
For more information contact:
The information and opinions contained in this document are for use by the financial press and media only. No reliance may be placed for any purpose on the information or opinions contained in this document nor should they be seen as advice.
The press release is provided on the basis that Aviva Investors Global Services Limited is not causing the communication of a financial promotion under exemption of the Financial Promotion Order, as Aviva Investors Global Services Limited has no control over the way in which an article based on this press release is prepared and published by the financial press and media.
Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”) as at 18 December 2019. Unless stated otherwise any views, opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested.
Issued by Aviva Investors Global Services Limited, registered in England No. 1151805. Registered Office: St Helen's, 1 Undershaft, London, EC3P 3DQ Authorised and regulated by the Financial Conduct Authority.
Aviva Investors is the global asset management business of Aviva plc. The business delivers investment management solutions, services and client-driven performance to clients worldwide. Aviva Investors operates in 14 countries in Asia Pacific, Europe, North America and the United Kingdom with assets under management of £346 billion in assets as at 30 June 2019.
Aviva provides life insurance, general insurance, health insurance and asset management to 33 million customers.
In the UK we are the leading insurer serving one in every four households and have strong businesses in selected markets in Europe, Asia and Canada. Our shares are listed on the London Stock Exchange and we are a member of the FTSE100 index.
Aviva’s asset management business, Aviva Investors, provides asset management services to both Aviva and external clients, and manages over £346 billion in assets (as at 30 June 2019). Total group assets under management at Aviva group are £501 billion (as at 30 June 2019).
Aviva helps people save for the future and manage the risks of everyday life; last year we paid £32.9 billion in claims and benefits on behalf of our 33 million customers.
By serving our customers well, we are building a business which is strong and sustainable, which our people are proud to work for, and which makes a positive contribution to society.
The Aviva newsroom at www.aviva.com/newsroom includes links to our image library, research reports and our news release archive.
For an introduction to what we do and how we do it, please click here