The global economy is heading towards a “normalized” growth path by the first half of 2021 as countries reopen, learn how to cope with the coronavirus (COVID-19) and avail of vaccine options in the coming months, investment experts from Manulife said.
Manulife Investment Management (US) managing director Michael Brock said of the vaccine options that would likely come to the market in the next couple of months, the most “exciting” was that being developed by Moderna, citing its “unique” safety profile.
“It means the first two quarters of next year are probably about normalization,” Brock said. “Students can be learning again normally in the new year, and in person, and safely.”
“Many economies are now reopening as governments ease lockdown protocols. Manulife is seeing signs of recovery, led by the US and China, the two largest economies in the world. This signals investment opportunities for investors who are looking for ways to diversify their portfolio and grow their wealth,” said Aira Gaspar, president and CEO of Manulife Asset Management and Trust Corp.
The pandemic has created a pent-up demand for people to consume, Brock said. In the US, he noted that the COVID-19 fiscal response had supported businesses, individuals and the overall economy in an “incredible” way.
“The response here has been important and unprecedented in strength and swiftness and it’s really helping us weather the storm. And it’s one big part of the reason why we have this V- shaped recovery at this point,” Brock said in a webinar.
“We’re confident that the US will have vaccines delivered pretty throughly and in fairly short order,” he said, adding that he was confidence on the logistical backbone that would support the mass production of such vaccine.
Some vaccine options may be launched towards the end of the year albeit it won’t be widely available immediately, said Kai Kong Chay, managing director and senior portfolio manager for Greater China equities at Manulife Investment Management (Hong Kong).
“We think that availability of the vaccine is not going to affect the recovery trend of the economy especially in China,” Chay said.
After experiencing a second wave of COVID19 infection, Chay said the subsequent lockdown and other measures had been “pretty successful” in China.
“I guess whether or not the vaccine is available is not important. Of course, if it’s available, recovery track will be faster,” he said.
Beyond the vaccine variable, Chay said territories with favorable structural growth prospects – for instance, in cities where consumers were rapidly embracing e-commerce – would be attractive investment destinations.
Brock, for his part, said people were raring to socialize and consumer and this would bode well for businesses, such as restaurants, that would survive this pandemic.
“A lot of the places where people can congregate – such as live shows, sporting events – will recover quickly because people are really anxious to get back out and return to normal after such a suppressed lifestyle,” he added.
Manulife sees the backdrop heading into the current economic crisis being better than that of the global financial crisis (GFC) that started in Wall Street in 2008. This time around, the US banking system is seen “overcapitalized” and thus in better position to aid recovery. While consumers have been adversely affected, they came into the crisis with lower debt burden.
During the GFC, Brock recalled that it had taken months to get the Troubled Asset Relief Program (TARP) economic stimulus program in place. “It took weeks this time and it’s the most polarized political environment in the US that I’ve seen in my nearly 50 years. They got out there and did the right thing,” Brock said.
“Could the healthcare response been better? Absolutely! We learned a lot from it. Healthcare will evolve here but the government has been investing in some of these solutions. They have been de-risking the production of these vaccines to ensure that the economy gets them quickly and they ought to be applauded for that.”
Over the near term, however, Manulife sees the US Presidential election, tensions between the US and China, possible resurgence in COVID-19 infections, and uncertainty about the pace of economic recovery dampening investor sentiment and creating bouts of market volatility.