During the first of our fortnightly portfolio and market updates focussing on the investment implications of the spread of COVID-19, Jacob Mitchell explains why the US will struggle to deal with the stimulus it needs to offset the credit crunch and solvency risk resulting from the impacts of the spread of COVID-19.
To view the full webinar, including comprehensive insights into where Antipodes sees value opportunities in current global markets click here.
You can register for upcoming webinars in the series here.
Episode 1 Part 3 – Transcript:
If you think about which of the larger countries or continents have gone into this unexpected recession, obviously the US, in some ways, is least prepared.
It’s the latest – in terms of how infection growth rates have emerged – clearly China went into this first and seems to be emerging first. Europe came next and the US is last.
Now with the US being last – so infection rates are growing faster than they are in Europe – it’s then a question of what can the US do to offset this?
The announcement of two trillion dollars of fiscal stimulus, we’re yet to get all the details but that’s a big number. We’re talking about 10% of GDP roughly and that’s against an environment where the fiscal deficit is already 4% of GDP. Now, the fiscal deficit should never have been 4% of GDP, let’s face it, with the economy in such great shape. You only need to go back three months and the US was experiencing one of the most longest, most positive economic environments in the history of the country and yet it had a recessionary-like fiscal deficit.
So, the US is not in a great shape to deal with the inevitable stimulus that they need to offset the credit crunch and the solvency risk that is emerging in households and corporates.
Europe and China somewhat have a degree more flexibility. Also we think from a social policy perspective China has locked down much harder and Europe has come next, and the US is somewhat vacillating between locking down the economy and thinking about offsetting the risks to the economy.
Time will tell which policy is the right one but from where we sit we think a severe short lockdown seems to be the lowest risk strategy of containing both the health risks and the economic risks.
View the full webinar
This communication was prepared by Antipodes Partners Limited (ABN 29 602 042 035, AFSL 481 580) (Antipodes). Antipodes believes the information contained in this communication is based on reliable information, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. This communication is for general information only and was prepared for multiple distribution and does not take account of the specific investment objectives of individual recipients and it may not be appropriate in all circumstances. Persons relying on this information should do so in light of their specific investment objectives and financial situations. Any person considering action on the basis of this communication must seek individual advice relevant to their particular circumstances and investment objectives. Subject to any liability which cannot be excluded under the relevant laws, Antipodes disclaim all liability to any person relying on the information contained on this website in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information.
Any opinions or forecasts reflect the judgment and assumptions of Antipodes on the basis of information at the date of publication and may later change without notice. Any projections are estimates only and may not be realised in the future. Information on this website is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained on the website is prohibited without obtaining prior written permission from Antipodes.
Pinnacle Fund Services Limited ABN 29 082 494 362 AFSL 238371 is the product issuer of funds managed by Antipodes. Any potential investor should consider the relevant Product Disclosure Statement available at www.antipodesonespartners.com when deciding whether to acquire, or continue to hold units in a fund. The issuer is not licensed to provide financial product advice. Please consult your financial adviser before making a decision. Past performance is not a reliable indicator of future performance.