Global Macro Outlook—navigating COVID-19

An absence of visibility

We’re three months into the COVID-19 outbreak and we find the economic outlook is worsening. Forecasting in this environment is a near-futile exercise—in a sense, we’re all torn between playing catch up with backward-looking economic data and analyzing real-time developments.

That said, our team has identified several macroeconomic themes and assumptions with which we carry moderate to high levels of conviction. These assumptions are fluid and could evolve as the situation changes, but they provide a useful framework through which we can have a better read of capital markets and the global economy.

In particular, the ferocity with which central banks and government leaders worldwide have responded to developments should, in our view, mitigate “worst case” outcomes, preventing a period of economic contraction from becoming a financial crisis. However, without hyperbole, we believe the global economy is facing its worst quarterly contraction in modern economic history.

As we navigate the (hopefully) short-term challenges ahead, we’re also mindful of the structural shifts that the COVID-19 outbreak will create. As challenging as the next several months will be, there will eventually be a recovery and, with it, a variety of important opportunities. 

A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, and affect fund performance. For example, the novel coronavirus disease (COVID-19) has resulted in significant disruptions to global business activity. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other pre-existing political, social and economic risks. Any such impact could adversely affect the fund’s performance, resulting in losses to your investment.

Investing involves risks, including the potential loss of principal. Financial markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. These risks are magnified for investments made in emerging markets. Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of a portfolio’s investments.

The information provided does not take into account the suitability, investment objectives, financial situation, or particular needs of any specific person. You should consider the suitability of any type of investment for your circumstances and, if necessary, seek professional advice.

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Frances Donald

Frances Donald, 

Chief Economist and Head of Macroeconomic Strategy

Manulife Investment Management

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Alex Grassino

Alex Grassino, 

Senior Investment Strategist, Macroeconomic and Strategy Team

Manulife Investment Management

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Sue Trinh

Sue Trinh, 

Senior Macro Strategist

Manulife Investment Management

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