{"id":94411,"date":"2020-05-04T00:05:00","date_gmt":"2020-05-03T22:05:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/opinion\/coronavirus-research-research-research\/"},"modified":"2020-05-04T00:05:00","modified_gmt":"2020-05-03T22:05:00","slug":"coronavirus-research-research-research","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/opinion\/coronavirus-research-research-research\/","title":{"rendered":"Coronavirus: research, research, research\u2026"},"content":{"rendered":"<p><em> <strong>At Columbia Threadneedle Investments, our team of 180 analysts<br \/>\nand research associates is dedicated to original, independent<br \/>\nresearch. Working collaboratively across all major asset classes our<br \/>\nteams utilize big data and analytics, such as machine learning and<br \/>\naugmented intelligence, to turn information into forward-looking<br \/>\ninsights that add real value to investment decisions, enabling<br \/>\nconsistent and replicable outcomes for our clients.<\/strong> <\/em><\/p>\n<p>In response to the evolving Covid-19 pandemic, we are focusing our research efforts on four broad areas: 1) The health care impacts; 2) The economic impacts; 3) The market impacts; and 4) Long-term implications.<\/p>\n<p><strong>The health care impacts<\/strong><\/p>\n<p>The first step is to understand the spread of the virus and disease. We are not medical<br \/>\nprofessionals, but our research experts understand data and statistics. They are analysing the<br \/>\nspread of Covid-19 \u2013 the success or failure of containment policies and studying attempts to<br \/>\n\u2018normalize\u2019 economic activity as infection rates ease. They are also evaluating the recovery<br \/>\nrates and mortality rates \u2013 here the demographic profile of mortality is key. If the distribution of<br \/>\nmortality changed materially to affect the active labour force, the impact of longer-term<br \/>\naggregate global economic recovery and growth could be damaging, and forecasts would<br \/>\nneed to change. However, even if current mortality trends persist there may be behavioural<br \/>\nchanges that impact how consumers spend or save and how firms organise supply chains.<\/p>\n<p>While we wait for news on anti-viral treatments (even if successful the vaccine may not be<br \/>\nready until Q3, 2021), we are busy exploring related areas. These include the IL-6 treatments<br \/>\nfor lung issues \u2013 which bring potentially lower mortality rates and shorter use of ventilators \u2013 as<br \/>\nwell as assessing the implications of the delay in treatments for other medical conditions.<\/p>\n<p><strong>Our working assumption is that recovery will be activated by a series of dials, not a single switch. Recovery will also come at different rates by region and industry.<\/strong> <\/p>\n<p><strong>The economic impacts<\/strong><\/p>\n<p>The health care impacts of Covid-19 are directly linked to what happens in the global<br \/>\neconomy. As official measures of the economic impact are released, we will see a significant<br \/>\ncontraction in activity worldwide as a result of the shutdown.<\/p>\n<p>In terms of data, the impact of the economic freeze is seen first on jobs; unemployment will<br \/>\nrise dramatically, with the peak expected in the second quarter numbers. GDP contraction will<br \/>\nfollow \u2013 for example, the recent eurozone PMI (Purchasing Managers Index) was very weak<br \/>\nand appears consistent with a 10% contraction in eurozone growth.<\/p>\n<p>While \u2018normal\u2019 economic metrics help us quantify what has happened they are not as useful in<br \/>\nhelping us consider what <em>will<\/em> happen. Consequently, we have switched our focus to different<br \/>\neconomic indicators. These include levels of pollution, traffic and mobile phone movement \u2013<br \/>\nwhich imply, when cross referenced, if movement is picking up which may be a leading<br \/>\nindicator for economic activity. Regarding movement of people, we are focusing more on<br \/>\nweekend movement (which may be voluntary) as a measure of sustainability, rather than<br \/>\nMonday-Friday movement (this may be more employer induced).<\/p>\n<p>In order to provide for debate and collaboration, it is necessary to create a consistent set of<br \/>\ndefinitions. We have defined arbitrary economic recovery \u2018shapes\u2019 in order to provide<br \/>\nconsistency to our research. <\/p>\n<p>V, U or L are defined as the potential paths taken to return to Q4, 2019 levels:<\/p>\n<ul>\n<li> V- shaped recovery in six quarters (Q4, 2021)<\/li>\n<li> U- shaped recovery in 10 quarters (Q4, 2022)<\/li>\n<li> L-shaped recovery beyond 2022.<\/li>\n<\/ul>\n<p>Our current base case is a variation on a \u2018U\u2019 shaped recovery. The total length of time to<br \/>\nrecover to Q4, 2019 levels is as described above, but the recovery path is complicated by a<br \/>\nsecond and third wave of infection within the recovery period. We expect the health care<br \/>\nresponse and economic impacts to be better and less severe respectively in each recurrence,<br \/>\nbased on the input of our health care research team. Our base case also assumes the<br \/>\ncontinuation and, in some instances, the expansion of central bank and fiscal intervention.<br \/>\nThese measures are the essential bridge over the deep economic valley we are experiencing.<\/p>\n<p>A critical additional input to our economic forecasts will be the feedback we receive from the<br \/>\nthousands of companies we research globally. This bottom up input will be critical to cross<br \/>\nreference with top-down assumptions.<\/p>\n<p><strong>Ultimately, the duration and intensity of this unprecedented economic shock depends<br \/>\non the duration of the shutdown.<\/strong><\/p>\n<p><strong>The market impacts<\/strong><\/p>\n<p>Our asset class experts and global research teams are building scenarios based on the<br \/>\neconomic base case and a more severe bear case for corporate cash flow (the air that keeps<br \/>\ncompanies alive now); balance sheet, (the water that keeps them alive medium term); and<br \/>\ngrowth (the food that helps them and the overall economy grow and remain healthy).<\/p>\n<p><strong>Long-term implications<\/strong><\/p>\n<p>We need to understand the behavioural and policy changes the pandemic and economic shock<br \/>\nwill bring about. Therefore, we have created a team to think about the longer-term implications<br \/>\noutside the frenzy of the current environment.  <\/p>\n","protected":false},"excerpt":{"rendered":"<p>In terms of data, the impact of the economic freeze is seen first on jobs; unemployment will<br \/>\nrise dramatically, with the peak expected in the second quarter numbers. GDP contraction will<br \/>\nfollow \u2013 for example, the recent eurozone PMI (Purchasing Managers Index) was very weak<br \/>\nand appears consistent with a 10% contraction in eurozone growth.<\/p>\n","protected":false},"author":1,"featured_media":94409,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1480],"tags":[1655,2073,1651,1437,2087,2148],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/94411"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=94411"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/94411\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/94409"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=94411"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=94411"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=94411"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}