An economy going through a phase of total shutdown for nearly two months is almost unheard of. We never wrote that scenario into our future strategies. We did not have a clear idea of how the second-order consequences would pan out. What happens when the whole world shut down for two months? Organisations will battle within for survival. Cost wars will wage. Liquidity crunches will stall functioning. Supply chains will face disruption. Institutional trust and business confidence will be impaired.
Such a phase will set in once we reopen for business. Our markets are assuming that the government has no option but to loosen its purse, open up to out of the box ideas to revive the economy and do whatever it takes. It will slowly dawn on the investment world that these things are going to be laborious.
While we did show tremendous initial optimism after the crash, the coming months will moderate our first response. It is however likely that we will see more positivity in the coming weeks. How investors navigate such a volatile phase of market moods will matter a lot. Investors must make sure that they use this rallying phase to prepare themselves for the long and enduring phase of pain ahead.
The economy and markets are now setting up for a long and slow convalescence. This recovery is going to be painfully slow and excruciatingly long. So, brace up for the long haul.
