2020 Global Outlook

Activity standstill

Recent market moves are reminiscent of the darkest days of the global financial crisis (GFC), but we don’t believe this is a repeat. Stringent containment and social distancing policies will bring economic activity to a near standstill, but provided aggressive fiscal and monetary policy actions are taken to bridge businesses and households through the shock, activity should return rapidly.

Implication: We are sticking to benchmark holdings and looking to rebalance into the risk asset decline.

Virus-related disruptions now pushing growth lower
BlackRock Growth GPS for developed market economies, 2016-2020

BlackRock Growth GPS for developed market economies, 2016-2020
  • BlackRock Investment Institute, and IHS-Markit, with data from Refinitiv Datastream, April 2020. Notes: The chart shows the seasonal adjusted composite purchasing managers’ indexes (PMIs) for developed and emerging economies.

  • Record plunges in economic activity data – US retail sales, initial unemployment claims and global manufacturing output being the latest – are confirming the unprecedented contraction in economic activity. See the chart above.
  • The rate of growth in virus cases looks to be slowing in many regions as stringent shutdown measures take effect. A key question: whether such measures can be lifted without a major second wave of cases.
  • The U.S. will likely prove more resilient because of a smaller share of manufacturing in its GDP, a relatively high share of healthcare spending and an aggressive policy response.
  • The nature of the rebound will depend on the path of the outbreak, effective delivery of policy response and potential changes to consumer and corporate behaviors.

Bottom line: We see this shock as a temporary one and do not expect a repeat of the “lost decade” following the global financial crisis, but timely implementation of policy stimulus is critical.

Meet the authors
Philipp Hildebrand
Vice Chairman
Jean Boivin
Head of BlackRock Investment Institute
Elga Bartsch
Head of Economic and Markets Research
Scott Thiel
Chief Fixed Income Strategist