A tall order! April 3, 2020

A tall order! April 3, 2020

• 1st requirement: spread of the crisis visibly peaks. 2nd requirement: business shutdowns and job losses prove short-lived post-crisis. Still seems a tall order.

• If the depth of the sudden economic impact exceeds that of the two previous major crises, its length had better be shorter for risk markets to hold up.

• One potential bright spot is the oil market. The downward shift in demand will track the general crisis. Excess supply need not. But geopolitics make this a hard call (p.3).

• Corporate earnings take centerstage. Bottom-up estimates still don’t sum up to anything realistic from a top-down perspective. We have made our own calculations (pp. 4-6).

• In the credit space, banks and the consumer goods sector still hold up well. Too well? (p.7)

• Current Illiquidity erodes the case for alternatives. Many private debt and private equity cases have been attractive due to compressed credit spreads and liquidity premiums (p.8)