The recent coronavirus outbreak has brought uncertainty not just over general public health, but also to the global economy at large. While scientists are racing to find a cure against COVID-19, major cities are on lockdown, the stock market is plummeting, and the world is on the verge of a recession.
These are indeed difficult times, but our resiliency has taught us to always rebound from major crises. So how do we jumpstart our economy after a pandemic?
History tells us that this is not the first outbreak the world has survived from. In Sun Life’s Bright Talks webinar last April 2 titled “Vigilance: Staying the Course with Your Investments,” Chief Investment Officer Michael Enriquez shares the current standing of global markets and the historical data of health scares in the past 50 years.
While epidemics such as MERS, AH1N1, and Zika have all made considerable impact on global stock market performance, data shows that global equities recover well after three to six months. This gives us hope that we will bounce back from our current situation.
Global and local strategies
On the international front, organizations and agencies have already enacted measures in a bid to revive growth. Global central banks have cut policy rates, and the US is now engaging in a $700 billion quantitative easing program and a $2 trillion fiscal stimulus.
Locally, the government is also undertaking initiatives to mitigate some of the effects of this pandemic. The Bayanihan to Heal As One Act, which provides emergency powers to the President, allows for directed spending to sectors that are most susceptible to this crisis. In addition, the Bangko Sentral ng Pilipinas has cut policy rates and bought PhP 300 billion worth of treasury bonds to minimize the impact of the economic shutdown.
During the webinar, Sun Life Chief Market Development Officer Michael Manuel shares the two fundamentals in ensuring the survival of the economy amid this crisis—first, the fiscal and monetary policies that government began to undertake; and then, the efforts of private corporations.
Manuel notes that because market earnings are at a stable 12% per year since the global financial crisis in 2008, companies in the Philippines are well-capitalized and can, therefore, absorb the impact of this outbreak. So much so, in fact, that major corporations such as the Ayala group, Vista Land, and Aboitiz are the ones leading major relief efforts to support frontliners and those who have been infected with the virus.
Taking all of these factors into consideration, Enriquez is hopeful that our economy will rebound well after this pandemic.
“Our economy is consumption-driven, so if the lockdown is just short, then we can expect the economy to bounce back sooner than other markets,” Enriquez says.
Sun Life’s strategy
In an effort to alleviate the effects of this crisis, Enriquez says Sun Life Philippines is rebalancing its portfolio to preferred sectors such as telecommunications, power, and non-discretionary retailers, as these are the ones least affected by the economic slowdown. In addition, Sun Life maintains ample cash to fund possible redemptions during this time of uncertainty.
But Manuel strongly advises investors to stay the course in their investments even during these troubled times. He explains that investors should focus on the value of their investments rather than current prices because there is more value today in stocks than what the price actually indicates.
“In a choppy and unpredictable local and global environment, anchor your emotions and let your investment plans run their course,” Manuel says. “Your worst performing bonds today can be your best performing bonds tomorrow.”
He adds that investors should assess their risk tolerance, which is composed of their willingness to take risk and their ability to bear risk, in order to take their next investment steps.
But while we are experiencing this economic slowdown, Manuel assures Sun Life investors that the company is managing its investments the best way possible.
“The whole investments team will continue to deliver the right service to manage portfolios so we can add value to your investments,” Manuel ends.