QUESTION OF THE WEEK

Which virus data most affects risk assets?

Every other week, we ask for your thoughts on a top question our portfolio managers and strategists are debating. We share the final poll results and insights.

Covid-19 cases are on the rise again in many regions, posing risks to the economic restart. Which virus-related data do you see as most critical to the outlook for risk assets for the rest of the year?

        Poll results: Which virus data most affects risk assets?

        Source: Blackrock Investment Institute with data from SurveyMonkey. Note: Data does not include results from BlackRock social media polls.

        Votes from our public poll showed new Covid-19 cases (23.53%) and mobility rates (20.59%) as the most likely to impact risk assets. The next most popular response, with roughly 18% of the vote: the effectiveness of trials for a vaccine.

        The top answer from BlackRock portfolio manager responses: data on vaccine effectiveness is critical when assessing the outlook for risk assets. The rest of the responses were spread out among the options, with several investors choosing hospitalization or ICU rates in combination with other data.

        The BlackRock Investment Institute's new Covid-19 tracker shows how hospitalization rates are increasing again in developed markets after the surge in new cases of the past few months. 

        We believe the current Covid-19 wave has been significantly smaller and slower than the first wave after correcting for the greatly increased volume of testing. And there appears to be less of a trade-off between economic activity and public health. Our base case remains a shallower, longer second wave that is unlikely to have the same impact on mobility as the initial outbreak. Yet the hardest part of the economic restart – closing the gap to pre-Covid activity levels – lies ahead.

        Diving into virus data. One portfolio manager said he would like to see data on the public perception of the severity of the virus – this cannot be inferred from mobility data alone. A currency trader noted that foreign exchange markets have shifted focus to vaccine developments and the rise in Covid cases across Europe. In Europe, the markets are focused on rising infection and hospitalization rates – the surprise this time is how quickly governments are moving to lockdown types of situations, such as in Ireland and Wales. Vaccine data is the key and will likely dictate the trajectory for cyclical companies. 

        BlackRock’s Multi-Assets Strategies team follows a vaccine sentiment index based on news text analysis and it is showing that sentiment is tailing off after a strong improvement over the summer. Another portfolio manager reflected lingering skepticism among some fund managers over the timeline for a successful vaccine:

        Quotation start

        We still don't have a vaccine for HIV or any human coronavirus.

        Quotation end

        Vaccine safety is an important determinant alongside efficacy – though it is harder to predict. Another observation was there has been a distinct divergence in market performance between economies perceived to have handled the Covid crisis well and those that have struggled. Our latest Market risk monitor sheds light on risk sentiment and market volatility.

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