Progress to date has been limited and getting to effective national-level protection will be a protracted process, but there is now a good prospect that global economic activity will gradually recover over 2021-22

Local and international equity markets continue to take comfort from the prospect of vaccinations bringing the coronavirus pandemic under control

The first coronavirus vaccinations are underway, and in many countries (including New Zealand) the economic bounceback from the initial lockdowns has been stronger and faster than earlier expected.

It is not surprising that earlier this month the Reserve Bank of New Zealand has provided further monetary policy support to help with what is likely to be an extended period of post-COVID-19 recovery

Here the virus remains well-contained, but overseas there has been a resurgence in cases across a wide range of countries. However, the latest analysis is that the global economy will still recover in 2021.

as demonstrated by the impact of the recent cluster of new cases in Auckland and the resultant business restrictions. At the moment, the consensus view is that both the global and local economies will gradually pull out of the COVID-19-induced recession, but it will be a long and slow haul, with ongoing risk of relapse. Given the ongoing uncertainty, extensive diversification and other defensive portfolio insurance will be central to good outcomes.

Besides the local outbreak in Auckland, the daily number of global new cases continues to increase. At the moment, the consensus view among forecasters remains that 2021 will see a recovery in both the global and domestic economies, which could see the sectors previously most affected by COVID-19 lockdowns regain some lost ground, but risks remain tilted to the downside. Portfolio protection through extensive diversification and more defensive sectoral choices will have to remain a priority.

It is still not clear how the global economy will play out. There are signs that the worst has passed, and that fiscal and monetary policy almost everywhere is strongly supportive.. However, even if COVID-19 is contained--a big if given recent experience in the U.S. and elsewhere--further progress is more likely to be gradual and possibly interrupted by new outbreaks, rather than a quick V-shaped recovery.

The latest forecasts for the global economic outlook are pointing to gradual recovery, and growth assets have improved from their previous coronavirus losses but Investors will need to be realistic about the time it will take to get back to pre-outbreak conditions.

Local and international markets have marked time in recent weeks as investors wait to see how the coronavirus outbreak will develop and what its ultimate impact will be. On the plus side, with supportive economic policies that have been put in place and anti-COVID-19 measures like lockdowns and distancing, it is plausible that we are at or near the low point for the global economic cycle.

While forecasters are typically running with a range of scenarios, most agree that their baseline or best-guess scenario is for a serious setback to world trade and gross domestic product this year, followed by a recovery next year. The shape and speed of the recovery remains very uncertain, however, with fund managers inclined to believe it may be a more gradual affair rather than a rapid return to normality.

We are seeing a major correction occurring in all global equity markets as investors try to assess the impact of the coronavirus on corporate profits. The Dow Jones is now down over 12% from the peak it reached on the 12 February as near panic grips many markets…

Coronavirus has dominated discussion of the immediate economic outlook. At the moment, the consensus’ view (as expressed by, among others, both Australia's and New Zealand’s central banks) is a short, limited impact on local and global economic activity. But nobody can be sure…

Assuming the virus does not have major consequences, risk assets could perform well: Global fund managers think the equity market will not peak before the September quarter this year…

The economic outlook has perked up, due to strong economic data out of the U.S., modestly better data in the rest of the world, and, critically, a trade agreement between the U.S. and China, which, with the British election results, has helped defuse investor anxieties about global growth. .…

While geopolitical risks remain high, at the moment investment sentiment has turned more positive on a potential (if only partial) resolution of the U.S.-China trade disputes. Growth assets have consequently benefited, while the prospect of a pick-up in world growth, and reduced demand for defensive boltholes, have led to sell-offs for bonds and bond proxies.…

Global financial markets have continued to be choppy as investor sentiment has reacted to the twists and turns in US-China trade relations and to the flow of data on the outlook for the global economy.…

Global equities have continued to recover from previous losses, as investors have become less concerned about recession risks and damage to the world economy from U.S-China trade frictions. A consequence has been a global rise in bond yields as investors have felt less need to buy safe-haven assets as insurance against downside risks…

The past few weeks have been dominated by geopolitical uncertainty, particularly the prospect of a US-China trade war and its potential impact on global business activity: Equity markets have whipsawed as trade tensions have risen or receded. The other major development has been further declines in local and global interest rates to even lower levels....

Interest rates have fallen to ever lower levels, benefiting both bonds (through capital gains) and equities (through improved absolute and relative valuation). Most of the impetus has come from central banks trying to get inflation to the levels they would prefer, but some (including in New Zealand) has also been insurance against potential economic slowdown....