Coronavirus fears


Coronavirus fears

The market has moved from looking through the noise of Coronavirus to one which is starting to panic! 

Why do we say panic? Here you can see the one-week returns due to coronavirus versus other risk-off markets in the past. What makes coronavirus different is that any impact is going to be transitory as opposed to previous, large one-week moves where the long-term impacts were more structural. To be clear, we’re by no means saying we have seen the bottom – we likely haven’t. However the broad based panic is spreading fear and as the market moves from greed to fear this usually presents attractive opportunities, in pockets.


One of the benefits of having a global research team is we have analysts across the globe that have their ear to the ground – this allows us not to blindly buy the dip but to choose our spots.


We see opportunities in the traditional defensive sectors such as telecoms and staples but we are also seeing interesting opportunities being thrown-up in cyclical areas such as autos too. We believe it pays to be contrarian but it pays to do so smartly. There are going to be ongoing areas of pain as the virus continues to spread – this will hit industrial production and consumer spending as the movement of people begins to slow. However, there are a plethora of high yield businesses with plenty of liquidity, recurring revenues and earnings which are based on long-term contracts that will go undesrupted. It’s on those types of credits we are focusing our attention. As we mentioned last month, volatility and dispersion are picking up – for the active manager, with global scale, this is a good thing!


More about the authors

Mark Benbow Portfolio Manager

Mark Benbow, portfolio manager, is a member of the global leveraged finance team. He specialises in high yield bonds and co-manages our global high yield strategies.



Read next