Asset manager Unigestion warns of massive sale that predicts global recession amid financial crisis

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Unigestion, the global asset manager, warned that the COVID-19 epidemic would lead to a recession throughout the global financial crisis.
Unigestion told investors that, in a baseline scenario, the coronavirus crisis would cause economic contraction of 3.6% in the euro area and 2.9% in the United States for the year 2020. Its extreme scenario would see 6.6% and 5.9% contractions respectively. . In 2009, the United States’ gross domestic product decreased by 2.5% while that of the euro zone decreased by 4.5%.

Despite the recent rebound in equities, Unigestion has advised against betting on a rapid market recovery.
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On a conference call on Wednesday, the company’s macroeconomic research manager Florian Ielpo said that when companies publish their results in the coming weeks, the depth of the economic impact of the coronavirus crisis will become clearer. This, in turn, will trigger a new sale on the stock market.
“We think the macro will essentially reassert itself and that it will be a fairly difficult period for the markets to come,” he said.
Ielpo calls for caution for investors looking to buy stocks at low prices. As prices have fallen, lowering the price-to-earnings ratio often used as an indicator of the value of a stock, earnings expectations should also fall.
“Prices have dropped dramatically from their current level … but if we go back to our baseline scenario that we envision something like a 2008 type shock, we think profit forecasts are still a long way off fall. “
“Particularly in the coming weeks, as companies start reporting their first quarter profits, we will see analysts continuing to revise these estimates lower,” he said.
The S & P500
SPX,
+ 3.40%,
Nasdaq composite
COMP,
+ 2.58%,
and Dow Jones Industrial Average
DJIA,
+ 3.44%

the indices all gained about 10% this week. London FTSE 100
FTSE,
+ 1.49%,
CAC 40 French
CAC,
-0.30%

and the German DAX
DAX,
+ 1.10%

also increased by about 5%.
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Unigestion’s modeling suggests a sale ahead of the highs at the start of this year, approaching the -50% drop seen during and after the financial crisis.
Ielpo said the huge fiscal and monetary stimulus packages given by governments around the world were positive, but suggested focusing more on direct support, rather than just lending, and more comprehensive guidance would be more effective.
“Until we see a better balance of stimulation, we want to be a little careful,” said Ielpo.

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