Markets ‘oblivious’ to threat of second outbreak

By Lachlan Maddock

— 1 minute read

15 April 2020

The CEO of one of the world’s largest financial consultancies says that markets are too optimistic and haven’t priced in a potential second wave of coronavirus.

Investors clinging to positive news out of China and hints that some major lockdowns will soon end need a reality check, says deVere CEO Nigel Green, who believes that second wave of coronavirus infections could destabilise markets further.

“It’s truly astonishing that as global economic growth forecasts are looking bleak and most countries are battling potentially one of the worst downturns in a generation, the markets are on fire and trading as though these are normal times,” Mr Green said.

“They are not normal times. We are in unchartered waters. This isn’t the time to be complacent as I doubt the bear market is over. We shouldn’t call the bottom yet.”

JPMorgan Chase and Wells Fargo have already posted losses of more than 50 per cent as they brace for a wave of loan defaults, and other institutions are likely to follow suit as earnings season gets underway – something that Mr Green says will be “just the beginning” as forecasts for the rest of the year are revised down.

And markets are also failing to price in other threats, new and old – including a no-deal Brexit, the US presidential election, and longer term inflation risks.

“The markets’ bullish sentiment during this mass disruption and dislocation would be baffling enough, but there are also other headwinds on the horizon,” Mr Green said.

“To sidestep taking a potentially massive hit, investors must avoid complacency and emotional decisions through solid financial strategies.”