Seix investment grade and leveraged finance teams share their observations and outlook on the impact of the coronavirus on the global economy and markets.
Keeping Dry Powder During a Black Swan Event
Coronavirus struck during a global synchronized slowdown driven by the manufacturing side of the global economy. The consensus is that this coronavirus will be transitory followed by a V-shaped recovery, but the risk is that a supply shock could become a demand shock if it spreads and is not contained. From an investment perspective, this black swan hit at a time where risk was priced for perfection in both equities and credit as valuations are very stretched.
Will China’s Sneezes Lead to a Global Recession?
As financial markets around the world gyrated around efforts to contain a spreading Coronavirus, sector-by-sector assessment of threats and opportunities highlighted the February 27th meeting of Seix’s leveraged credit committee.
“Sequentially, the news is going to get worse,” said Michael Kirkpatrick, Managing Director, Senior Portfolio Manager for high yield strategies. “How bad it gets is hard to say. Maybe China is seeing the worst of it, but apparently nobody is in the stores. In addition, the ramp-up may take time, and there’s a risk of a relapse.”