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The coronavirus crisis: hitting the reset button

When we emerge from the coronavirus pandemic, investors are likely to find a fundamentally altered political and economic landscape. It is therefore time to push the pause button and reset our expectations for the remainder of the year.

In December 2019, Aoifinn Devitt, Head of Investment – Ireland, was joined by Andrew ‘Jacko’ Jackson, Head of Fixed Income, Will Pomroy, Lead Engager of SDG Engagement and Small & Mid Cap Equities, and Bruce Duguid, Head of Stewardship at EOS at Federated Hermes, to discuss their outlooks for 2020.

Yet we had little sense of the human tragedy that was to come, or the impact that it would have on lives, economies and markets. As the coronavirus pandemic reorders society, we think it is now time to reset our expectations for the remainder of the year across fixed-income markets, the Sustainable Development Goals and stewardship.

Virus volatility: a lot like 2008

In recent months, markets have gone into “full-on panic territory”, Jacko explains. “There were days that felt very much like 2008 in terms of the way markets were reacting. There was a sudden loss of liquidity which is normally associated with periods of high volatility.”

Innovating during a crisis

For Pomroy, some companies that he engages with are innovating – and by having a clear sense of purpose during this time, they are helping to mitigate the impact of the pandemic on their workers.

“For example, there has been a drop in demand in food on-the-go packaging. We have been engaging with a Finnish packaging company – and 40% of its sales are in the food on-the-go sector. This company repurposed its equipment (which would otherwise have remained idle) to manufacture between four and six million face masks for NHS workers,” says Pomroy.

Coronavirus: a threat to companies' survivability

In EOS at Federated Hermes, our engagements with companies focus on ensuring they manage their businesses responsibly in order to deliver sustainable wealth creation. As such, Duguid points out that the current pandemic is “a major threat to the performance of companies and possibly their survivability.”

“We always have an expectation that companies should have operational risk management systems in place that can deal with many categories of external risks should they occur – and this infectious disease risk was one of the top 10 risks identified by the World Economic Forum,” he added.

To find out more about our big reset of expectations for 2020, tune in to Amplified.

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