Rising fears of the spread of the coronavirus, together with plunging oil markets, have global markets moving at an unprecedented pace and magnitude. Virtus investment affiliates and subadvisers discuss current market conditions and the impact of recent volatility on their investment strategies. Read their views and insights across equity, fixed income, and alternative markets and engage with our tools and resources to help you through these challenging times.
April 3, 2020
Consistency through Crisis and the Importance of Dividends
The phrase “unprecedented times” can seem overused these days, but it seems appropriate to describe the current state of financial markets. At year-end 2019 when investors were celebrating a spectacular run in stocks worldwide, who could have foreseen the dramatic scenarios currently unfolding in global financial and economic markets and the painful negative effects on businesses and consumers? In this time of uncertainty, we wanted to offer an update on our thoughts about today’s investment environment and its impact on our portfolios.
March 24, 2020
Seeking Opportunities While Waiting on Answers
As new data is constantly emerging regarding the coronavirus pandemic, market participants are looking for an answer to the looming question: When can we expect to see light and the end of this crisis? Realistically, it is impossible to know when we will see a meaningful recovery. We must brace for this situation to last longer than current assumptions point. On the positive, Asia is slowly emerging and starting to return to normalcy. At the same time, caution still remains as the U.S. and the world at large seeks control over our shared unseen enemy. Here’s what we do know.
February 27, 2020
Thoughts on the Coronavirus Disruption
We view the coronavirus disruption as most likely a temporary phenomenon, the depth and duration of which is anyone’s guess. At this point, the market is discounting it as a Q1 event. If the disruption extends into the second quarter, or worse, the third quarter, that would be more concerning. Either way, we are appreciating at this moment the very attractive medium- to long-term opportunities being created from the selloff of an overextended market. In keeping with our bottom-up value approach, we will position our portfolios for the eventual resolution of this situation by continuing to focus on dividend-paying companies with underappreciated fundamentals and positive catalysts.
March 26, 2020
Views on India
The Vontobel Quality Growth Investment Team assesses the impact of the current crisis on India and offers an outlook on the Indian businesses owned in their portfolios.
March 23, 2020
Coronavirus Sell-off: Putting Volatility in Perspective
The world is witnessing a market panic as the continued spread of the coronavirus is threatening a global recession. The impact on global equity markets has been severe in recent weeks, and, combined with the oil price war, volatility has escalated. Vontobel’s Quality Growth investment team provides perspective on market events, opportunity created, and why quality growth businesses can help provide downside protection.
February 27, 2020
Staying the Course Amid the Coronavirus Epidemic
The recent outbreak and spreading of the coronavirus (COVID-19) and the resulting quarantine will affect business and economic activity in the near term, but conditions should normalize. We do not believe investors should be overly concerned, but we continue to monitor the situation. Our investment horizon is naturally long-term and this is likely a short-term issue. Thus, we continue to be diligent and will look to take advantage of any strong price dislocations that are not indicative of the long-term future earnings power of our quality growth investment universe.
Consumer facing companies may feel a negative impact, but strong consumer businesses can gain market share and benefit from long-term structural shifts. Consumption related businesses that sell mainly discretionary items, i.e., companies that sell luxury products or those related to travel and tourism (airlines, cruise ships, etc.) will be most directly impacted. …
March 26, 2020
Our Latest Thoughts on the Coronavirus, its Economic Implications, and Fixed Income Valuations
We know that the outbreak of the coronavirus (COVID-19) is going to disrupt supply chains, reduce demand as well as slow economic activity and growth. All of these factors will have an impact on inflation. At this juncture, it has become clear that this will be a global event with the policy response to contain the public health threat leading to declines in GDP. The severity and duration of the decline is still being assessed.
February 28, 2020
Remain Focused on Valuations in an Environment of Uncertainty
We know that the outbreak of the coronavirus (COVID-19) is going to disrupt supply chains, reduce demand as well as slow economic activity and growth. All of these factors will have an impact on inflation. Economic growth in China will be most severely impacted, but the effects will be felt globally. It is still too early to be able to estimate with any sort of accuracy how much economic growth in China and globally will be impacted.
March 26, 2020
Duff & Phelps Real Estate Securities Update
We have just witnessed the quickest pullback in the listed real estate space during the modern REIT era. This pullback has driven REITs to discounts to NAV we have not seen in decades. As of Tuesday March 24th, 2020, the benchmark returns for U.S. REITs (as represented by the FTSE NAREIT Equity Index) and Global Real Estate Securities (as represented by the FTSE EPRA NAREIT Developed Index) were both down about -35%. Duff & Phelps has outperformed its benchmark in both strategies thus far this year through active management.
March 11, 2020
Resilient Real Assets
Since February 19th, the yield on the U.S. 10-year bond has fallen from 1.56% to a record low of 0.54% on March 9th. Yet in that time the dividend yields on real asset equity securities, and equity securities in general, have moved the opposite way. Global listed real estate yields represented by the FTSE EPRA/NAREIT Developed Index was 4.21% as of March 10, while yields on global listed infrastructure as represented by the FTSE Developed Core Infrastructure 50/50 Index jumped to 2.80% on March 10. In other words, the same great companies, same great assets, same great management, same long-term contractual rents and contracts, and same dividend growth are all available at lower prices and higher yields today.
March 24, 2020
3 Questions Answered: KAR on Today’s Market Environment
Kayne Anderson Rudnick offers insights on how deep and how long this recession could be, signs that we’re nearing a market bottom, and how KAR portfolios are holding up in this environment.
March 11, 2020
KAR Perspective: Update on Market Volatility
On Monday, March 9, stocks fell more than 7%, as measured by the S&P 500® Index, the greatest percentage decline in the index since the global financial crisis in 2008. The fall in the stock market came amid continuing fears about the coronavirus (COVID-19) and a Saudi-Russian price war that sent crude oil prices crashing over the preceding weekend. Kayne Anderson Rudnick puts the stock market volatility in perspective, cautioning investors to ‘sit tight.’
February 26, 2020
Coronavirus and Recent Market Volatility
An outbreak of a new coronavirus strain in Wuhan, China in December has led to more than 75,000 confirmed infections and over 2,500 deaths to date worldwide. Past viral outbreaks have typically resulted in short, sharp shocks to economic output with a typical slowdown lasting one to three months and reducing one quarter's annualized GDP growth by several percentage points in the most affected countries. However, past cases of viral outbreaks show that gross output typically recovers to its long-term trend two to three quarters after the onset. We do not expect a sustained negative long-term business and market impact at this point. … The SARS epidemic in 2002-2003 may provide some insight as to the economic impact. …
March 20, 2020
SGA Coronavirus Update
SGA provides their latest thoughts on the coronavirus market situation and the opportunities that volatility has historically created for their high quality, sustainable growth portfolios.
February 28, 2020
SGA: Weathering the Storm, Assessing the Opportunities
As coronavirus fears rattle global markets, we remain focused on identifying the sustainable growth businesses we think can weather the difficulties associated with the current storm and come out the other side able to continue to generate attractive revenue and earnings growth on a long-term basis. Our Investment Committee is taking an “all hands on deck” approach to assess the impact of the coronavirus on companies that are on our Qualified Company List. Subsequently, we have continued to evaluate the likely effect it will have on these businesses as they begin to provide updated guidance on their sales for 2020. All of our analysts are involved in this process to ensure that the evaluations benefit from the broad perspectives that our team encapsulates.
March 19, 2020
A Drawdown Comparison to the Global Financial Crisis
According to Gregg Thomas, Director of Investment Strategy at Wellington Management, the market has been engaging most on companies that might not pass the "going concern" test in the face of the first real growth shock we’ve seen since the GFC, and that these companies are seeing a massive increase to their discount rates. Wellington’s definition of solvency looks at the relative distance to a default (similar to the model used by credit-rating agencies).
Coronavirus: Are Investors Over-Reacting or Too Complacent?
Aviva Investors’ heads of investment strategy, emerging market equities, and emerging market debt discuss the dangers posed to China’s and the world economy and assess whether the risks are fully priced into financial markets. The latest manufacturing figures are concerning, but it feels like the pain has been more severely felt in equities than in bonds or currencies. We have to look at opportunities for mispriced assets and also assess whether an existing view might have changed.
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.”
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.
Client-Approved Investment Education
Each commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.