PERSPECTIVE3-5 min to read

Coronavirus webinar: when will economic recovery come, and what will it look like?

Recovery will come, but when - and in what form? Watch the presentation by Schroder's Chief Economist Keith Wade and Cazenove Capital's Chief Investment Officer Caspar Rock, as they look ahead to a range of outcomes and explain the likely impact for markets and investors.



Caspar Rock
Chief Investment Officer
Keith Wade
Chief Economist & Strategist

Financial markets remain highly volatile, with investors trying to gauge when a recovery might emerge. The timing and strength of the recovery is likely to be crucial in determining long-term effects of the virus on both economies and markets.

Global economy: what form will recovery take?

In this presentation Schroder's Chief Economist Keith Wade sets out the scale of the current slowdown, pointing out that "we would need to go back to the 1930s to see anything on the scale of current drops in economic activity".

He also sets out the range of monetary and fiscal measures being deployed by authorities around the world. "The aim is to keep businesses intact," he says, "so that when the restrictions are lifted we can get the recovery going again. We think of the policy response as a bridge to get households and businesses over the effects of the virus."

Schroders' main case, as shown in this graph, is that "we have a big fall-off with a strong rebound in 2021".

Contribution to global growth - by region


Source: Schroders

The case represented in the chart is a "V"-shaped recovery, where the decline in activity is mirrored by the subsequent rebound.

But Keith says an alternative - and more painful - recovery scenario would see coronavirus lingering, causing parts of the global economy to recover more slowly and in phases.

"The concern is that we see a return of the virus," he says. "The UK may go through a series of cycles where restrctions are relaxed, only for a further shutdown to be introduced again if for example the virus returns in autumn."

This "coronvirus lingers" scenario would create a "W"-shaped recession.

The impact on stock markets and other financial markets

Caspar Rock sounds a warning about companies' future earnings, particularly in the latter scenario.

A slower, "W"-type recovery could have a more severe impact on future corporate profitability - making valuations, even at today's levels following recent weeks' share price declines, less attractive.

"Analysts have roughly downgraded earnings by 10% so far for 2020," he says. "We think there is room for further downgrades."

Caspar also discusses the outlook for dividends. This week has seen major UK banks canceling divident payments. The effect of this significant sector ceasing payments has been to depress the FTSE100's dividend yield from just above 6% to approximately 5%, he says, and he predicts "substantial dividend cutting over the next couple of years".

With Kate Leppard, Head of Client Service UK Wealth Management, Caspar and Keith go on to answer a range of investors' questions relating to the above topics and others, including the coronavirus's longer-term effect on the trade dispute existing between China and the US.

If you were unable to join this live webinar but would have liked to listen in and pose your own questions, more will be held in coming weeks. Please look out for invitations from your usual contact.

Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.



Caspar Rock
Chief Investment Officer
Keith Wade
Chief Economist & Strategist


Cazenove Capital is a trading name of Schroders (C.I.) Ltd which is licensed under the Banking Supervision (Bailiwick of Guernsey) Law 2020 and the Protection of Investors (Bailiwick of Guernsey) Law 2020, as amended in the conduct of banking and investment business. Registered address at Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 3UF, (No.24546) . Schroders (C.I.) Limited, Jersey Branch is regulated by the Jersey Financial Services Commission in the conduct of investment business. Registered address at IFC1, Esplanade, St Helier, Jersey, JE2 3BX, (No.31076).

The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.