Tracking Covid-19:
Blog#4
By Ashish Chanda -11th April 2020
We are witnessing the evolution of change.
In his recent letter to Blackrock’s shareholders, CEO Larry Fink wrote about how what we are seeing today is not a financial crisis in the real meaning of the word, but a crisis of confidence. This is not a bubble bursting, or a sector collapsing. But though this recession is not borne out of a structural fault, it will definitely lead to long-standing structural changes in our world.
In times like these, the best thing to do is to look at experts and ask for healthy, sane advice. So, for our April roundtable, we asked our partner firms for their views on the topic. Here’s what they had to say:
Sanjay Guglani (Founder and CIO) of Silverdale Funds
As I write this, New York, Italy, France, and Spain have seen their weekly COVID numbers go down, raising hopes of an approaching plateau of the virus spread. Even though it is early days in this fight, talk has already shifted to ‘when’ and ‘how’ we are going to recover from this.
Sanjay is of the opinion that “the recovery would be fairly swift but with a clear shift to ecommerce, and lifestyle brands that support social distancing or remote working like tele-meetings. The earnings for the June quarter will bear the brunt of the lockdown. On the other hand, the worst for credit markets looks to be over, especially with the Federal Bank and ECB back-stopping the markets, and fiscal stimulus announced by various Governments.
The panic we saw in the initial weeks of March (‘sell what you can’) is currently being replaced with ‘flight to safety’. Investment Grade bonds have seen marked appreciation in prices this week and are expected to continue to appreciate over the coming months. As regards non-investment grade bonds, one needs to be highly selective. Given huge uncertainties, it would be prudent to stick to shorter-duration bonds. Savvy investors can take advantage of significantly lower borrowing costs, to enhance their returns. As always, it would be better to invest through a broad-based fund, rather than taking monoline idiosyncratic risks.”