Fear at play

March 31, 2020

Fear at play
 

“There are two pandemics in play at the moment. The first is, of course, the spread of Covid-19 which is having such an enormous impact on the way we live, work and play. The second is a pandemic of fear that is most evident in empty supermarket shelves and in financial markets. The first pandemic is awful, but will ultimately pass. The second has ‘gone viral’ too and is, in some ways, the more dangerous since it risks turning a massive but ultimately temporary shock to the economy into something more long-lasting and damaging.

I’m often asked whether there are any close parallels to the current situation. The honest answer is probably no, but the Spanish influenza pandemic of 1918-19 rhymes a little. I won’t labor the detail here, but it was probably a bigger contributor to the global recession of the early 1920s than most economists have hitherto acknowledged. It was undoubtedly a more severe strain than the current coronavirus – more than 25 million prime-age workers died and upwards of 500 million people might have been infected. Coming at the end of the First World War, it spread quickly as troops demobilized to their home countries – a public health policy error (if an understandable one). But it was compounded by monetary and fiscal policy errors – the primary fears being wartime inflationary pressure and the huge rise in government debt. An undoubtedly complex situation was handled badly both from a public health and macroeconomic policy point of view. I don’t get the sense we’re making similar mistakes this time around.

I can only conclude that there are huge buying opportunities out there. Do we have to wait for markets to rediscover their collective minds and for the second pandemic to start to recede? For the bravest, possibly not.”

Shamik Dhar, chief economist BNY Mellon Investment Management

All investments involve risk, including the possible loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

Charts are provided for illustrative purposes and are not indicative of the past or future performance of any BNY Mellon Investment Management product.

BNY Mellon Investment Management is one of the world’s leading investment management organizations and one of the top U.S. wealth managers, encompassing BNY Mellon’s affiliated investment management firms, wealth management organization and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the corporation as a whole or its various subsidiaries generally.

Views expressed are those of the advisor stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. This information contains projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or expectations will be achieved, and actual results may be significantly different from that shown here. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Forecasts, estimates and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please consult a legal, tax or investment advisor in order to determine whether an investment product or service is appropriate for a particular situation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. BNY Mellon Investment Adviser, Inc., and BNY Mellon Securities Corporation are subsidiaries of BNY Mellon. 

Not FDIC-Insured | No Bank Guarantee | May Lose Value

MARK-109633-2020-03-26