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
  • Source

    Sources: BlackRock Investment Institute, with data from Consensus Economics, March 2020. Notes: The Growth GPS shows where consensus GDP forecast may stand in three months’ time, shifted forward by three months. Forward-looking estimates may not come to pass.

The level of economic activity is likely to step down for the full year as the outbreak has become a global public pandemic. Disruptions are already spreading across continents – and may further decelerate economic activity. This undermines the growth uptick we were expecting in 2020. At the outset of the year, our growth GPS was turning higher. We now expect a sharp decline in growth across developed market economies, as the chart above shows.

  • Public health measures to combat the coronavirus outbreak are set to bring economic activity to a near standstill and cause a sharp contraction in economic growth in the second quarter.
  • 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 a pledged aggressive policy response.
  • We expect a recovery in activity once disruptions dissipate, but the depth and duration of the trough are highly uncertain. These unknowns could weigh on consumption and investment.
  • The main risk to our view: a broadening of the outbreak is not met with a decisive policy response, triggering a premature end to the cycle.

Bottom line: Once we better understand the scale and impact of the coronavirus outbreak, the sizable policy response is setting the stage for an eventual – and strong – recovery.

Meet the authors
Philipp Hildebrand
Vice Chairman
Philipp Hildebrand, Vice Chairman of BlackRock, is a member of the firm's Global Executive Committee. He is also Chairman of the Financial Markets Advisory (FMA
Jean Boivin
Head of BlackRock Investment Institute
Jean Boivin, PhD, Managing Director, is the Head of the BlackRock Investment Institute (BII). The institute leverages BlackRock’s expertise and produces proprietary ...
Elga Bartsch
Head of Macro Research, BlackRock Investment Institute
Elga Bartsch, PhD, Managing Director, heads up economic and markets research at the Blackrock Investment Institute (BII). BII provides connectivity between BlackRock's ...
Mike Pyle
Chief Investment Strategist, BlackRock Investment Institute
Mike Pyle, CFA, Managing Director, is Global Chief Investment Strategist for BlackRock, leading the Investment Strategy function within the BlackRock Investment Institute ...
Scott Thiel
Chief Fixed Income Strategist, BlackRock Investment Institute
Scott Thiel, Managing Director, is Chief Fixed Income Strategist for BlackRock and a member of the BlackRock Investment Institute (BII). He is responsible for developing ...