2020 Global Outlook

Activity standstill

The coronavirus shock is sharper than what we saw in 2008 – but we believe its cumulative hit to growth over time is likely to be lower. The main risk to our view: policy needed to bridge businesses and households through the shock is not delivered in a successful and timely fashion, causing lasting economic damage.

Implication: We are mostly sticking to benchmark holdings on an asset class level; prefer credit over equities; and favor rebalancing into the risk asset decline.

Economic freeze
Composite PMIs of developed and emerging markets, 2006-2020

Composite PMIs of developed and emerging markets, 2006-2020
  • 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 Macro Research
Scott Thiel
Chief Fixed Income Strategist, BlackRock Investment Institute