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March 2020


Macro Views


COVID-19 has caused, and will likely continue to cause, volatility in global economies and markets. Given the considerable uncertainty, we are closely watching public health reports, high frequency economic indicators, and financial conditions to better understand potential outcomes. Our current base case assumes that the outbreak is contained globally in H1 2020 and recovery begins in the second half of the year. Read More

Global Growth

Global activity has been stymied by coronavirus due to 1) disrupted supply chains, 2) diminished trade and travel, and 3) direct effects of community spread. In the base case, global growth will be weak through Q2 but recover to 1.25% for full-year 2020. In China, the sharp contraction of Q1 activity may drag full-year Chinese growth closer to 3%. And in the Euro area, annual growth may contract by as much as -1.7%. Read More

US Growth

Risk to US activity has increased as companies realize supply chain effects (though healthy inventories may offset supply breaks through Q2) and communities experience viral outbreaks (nearly 1/3 of US GDP is at risk if consumers avoid public gatherings). In total, the virus may lower US 2020 GDP growth to 0.4% in our base case. Read More


Mounting economic risks have led global central banks to initiate policy accommodation. The Federal Reserve delivered a second intermeeting cut, lowering the Fed funds rate to 0%, announced an asset purchase program of at least $700bn, and has taken steps to support lending and liquidity. The ECB did not cut rates, but announced €120bn of additional asset purchases until year-end and a new bank refinancing operation. Read More

Market Views

US Equity

Weaker US export demand abroad and risk of diminished domestic consumption will likely prevent any US earnings growth in 2020. However, a widening yield gap should limit downside risk for equity prices. Our year-end S&P 500 price target is now 3200 with support from low rates and multiple expansion, though coronavirus uncertainty may see a mid-year trough of 2000, 41% below the all-time high. Read More

EM Equity

Depressed Chinese activity from coronavirus remains a growth drag and is amplified by second-order effects. So far, tourism, retail, and auto sectors have been most vulnerable to an earnings pullback, while lower in-store foot traffic may leave cyclical names exposed. Prolonged weakness in growth and profits would be a headwind for EM performance broadly. Read More


Negative global growth should weigh on corporate profitability and further challenge deteriorating fundamentals. Though IG borrowers may face deleveraging constraints, risks remain higher for HY credit with limited financial flexibility, less business diversification, and energy exposure. The recent uptick in “fallen angel” downgrades cement our preference for higher quality credit. Read More


Given renewed Fed action, marginal friction in the overnight market may persist though repo rates should still trade within the prescribed range. Continued Fed liquidity injection via asset purchases and use of temporary open market operation limits the potential for future funding shocks. Read More

CORONAVIRUS: Pandemics and policy

The public health measures being implemented to contain Covid-19 are creating major economic consequences in the short term. However, prior to the outbreak, the global economy was showing good momentum. With relatively few significant structural economic imbalances, the powerful combination of ultra-accommodative monetary policy, easy fiscal policy, and low oil prices could support a strong rebound in global GDP growth and equity markets in the second half of the year.

Economic policymakers objective is to contain the negative impact on growth

Economic policymakers have begun to roll out measures to contain the negative impact, and are highly likely to continue to do so via a combination of lower interest rates, asset purchases, targeted credit measures, macroprudential easing, and fiscal stimulus. Our current base case for the US economy assumes a deep contraction in Q2, followed by a rebound in the second half of the year.

Source: Goldman Sachs Global Investment Research and GSAM.

Top Section Notes: As of March 12, 2020. For illustrative purposes only. The capacity of the healthcare system is determined by the number of doctors, nurses, hospital beds, intensive care units and other variables. The capacity can change during an epidemic, for example when healthcare workers might be sick or in quarantine. Bottom Section Notes: As of March 12, 2020. Consumption effects include cutbacks to consumption categories requiring face-to-face interaction. Manufacturing effects include international spillovers to goods trade and supply chain. The economic and market forecasts presented herein are for informational purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved.  Please see additional disclosures at the end of this presentation.  For illustrative purposes only.

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