‘V-shaped" recovery from coronavirus market crash not expected by most investment firms, survey says - Proactive Investors USA & Canada | Canada News Media
Investment firms do not expect the US economy to mount a rapid ‘V-shaped’ recovery from the crash caused by the coronavirus pandemic, according to a new survey by the Boston Consulting Group (BCG).
The survey, which includes respondents representing firms with over US$4trn of assets under management, said 87% of those asked did not see a rapid bounce back to pre-crisis economic levels and growth rates, instead they expected any recovery to be either “U, W, or L” shaped.
Meanwhile, the data showed that 55% of respondents expected the “severe” economic impact of the crisis to have ended by the third quarter of 2020, however, 23% said it could last until the fourth quarter of the year.
Bearish for 2020 but bulls could return
Looking ahead, 60% of investors surveyed said they were ‘bearish’ in their outlook for the remainder of 2020, while 25% were neutral in their outlook.
However, BCG highlighted that respondents were “increasingly bullish” for 2021 and 2022, with 55% either bullish or extremely bullish for the next calendar year, rising to 63% for the year after.
Companies given “unexpected” flexibility to weather downturn
For companies themselves, BCG indicated that while investors had clear expectations, they also appeared to be offering “financially healthy companies unexpected flexibility to navigate the crisis”.
The survey showed that 79% of investors wanted firms to provide or revise guidance for the current fiscal year within the next three months, but only 56% thought it was important to deliver earnings per share (EPS) in line with revised guidance for the current year.
Instead, the survey showed 89% of respondents wanted company directors to prepare for the economic “bounce back”, building advantaged business capabilities to “drive future growth—even if it means guiding to lower EPS or delivering below consensus”.
BCG also highlighted that investors supported “some typically unconventional near-term moves that would previously have been ‘off-the-table’”, with 73% of survey responders saying firms should be “ intensely focused on preserving liquidity even if it is at the expense of investing to achieve advantage in the business”.
Meanwhile, 63% thought companies should not aggressively repurchase shares despite low valuations, and 53% were comfortable with firms not maintaining their dividend in the near-term.
Acquisitions on the agenda
While investors may not be in favour of share buybacks during a period of low valuation, the survey data showed that the downturn in company values could instead see additional pressure for acquisitions.
BCG said 58% of investors believed business should “ actively pursue acquisitions” to strengthen themselves over the period, while 59% predicted that there will be an increase in investor activism and firms should take steps to reduce the risk of such activity by “strengthening their businesses’ near- and medium-term fundamentals”.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
