16 Mar 2020

Wave of worry

Article Image: 
Thumb: Wave of worry
by Seema Shah, Chief Strategist
Binay Chandgothia, CFA, Managing Director, Portfolio Manager and Head of Asia
Todd Jablonski, CFA, Chief Investment Officer

Deciphering the ride so far, what we're watching as we manage money, and thoughts on portfolio construction amid the storm

  • Looking back on the events that brought markets to where they are now, expect the inevitable comparisons to the global financial crisis. But conditions leading up to this bear market are far different than 2008.
  • The optimism that opened 2020 has faded. Many companies have suspended guidance due to COVID-19 and, in turn, analysts are struggling to estimate true earnings for the year. While we've already dipped below the lows seen during Euro-area crisis and the oil bust in 2016—we'll likely see PMIs go lower before recovering, aligned with a return to more normal economic activity.
  • In the short term, recent volatility makes it difficult to distinguish signal from noise—yet long-term investment implications and long-dated discernments offer opportunity. Across our multi-asset investment strategies at Principal, we're actively steering positive cash flows toward increasing equity exposure, while actively steering negative cash flows toward fixed income assets.