As market turmoil continues, we consider the outlook for global equities.

  • Concerted central-bank action leaves investors unimpressed
  • We expect equity-market volatility to persist
  • Opportunities are emerging in businesses with low leverage, differentiated business models and strong structural growth potential
  • Taking a long-term view is crucial

More wild gyrations have tested the nerves of investors as they try to get to grips with the impact of the coronavirus and promises of fiscal loosening by governments, against the pre-existing backdrop of structurally low economic growth in the wake of the 2008-9 financial crisis. Following attempts by various central banks to assuage both economic and market uncertainty, a group of them led by the US Federal Reserve announced aggressive and concerted action, including a US interest-rate cut of a full 1%. This takes rates back to levels last witnessed in 2009, and is accompanied by injections of liquidity designed to ease distressed credit markets. Investors were unimpressed, with sharp falls registered across equity exchanges across the globe in the wake of the announcement.

On market volatility

It was widely believed that the early phases of this market volatility were a ‘healthy correction’, as investors marked equities lower after a period in which they had got ahead of themselves. However, as the last few weeks have unfolded, there has been a growing fear that the world faces a perfect storm. The Saudi/Russian oil-price war, which played a major part in catalysing market turmoil, does not even, for now, seem to bring the silver lining which comes to economies in these situations in the form of cheaper energy, as increasing numbers of consumers are falling ill, working from home or self-isolating in an effort to avoid the coronavirus.

Bans on international travel being imposed on an increasingly widespread basis, and severe nationwide lockdowns, have added to the sense of crisis. The economic impacts are likely to be significant; and any bounce-back as the year wears on may not bring bourses back to immediately preceding levels. Interest-rate cuts such as those mentioned above are essential in attempting to steady shaky credit markets reeling from the significant impact on the energy industry from falling oil prices; however, they can do little to nullify the supply-side shock originating from supply-chain disruption in China.

On global equities

Movements in both directions are likely to be extreme for now and equities exceptionally volatile. But we believe opportunities are starting to present themselves in businesses with low leverage, differentiated business models and strong structural growth potential. Obviously the stocks of many of these companies are available at materially lower prices than they were a month ago. They may get cheaper still. Clearly a strong nerve is required and it may well get darker before we see the light; but, for those taking a long-term view, we believe some attractive entry points are beginning to emerge.


Paul Markham

Paul Markham

Head of Global Opportunities


Your email address will not be published.

Newton does not capture and store any personal information about an individual who accesses this blog, except where he or she volunteers such information, whether via email, an electronic form or other means. Where personal information is supplied, it will be used only in relation to this blog, and will not be collected or stored for any other purpose. Comments submitted via the blog are moderated, and, as a result, there may be a delay before they are posted.

Important information

This material is for Australian wholesale clients only and is not intended for distribution to, nor should it be relied upon by, retail clients. This information has not been prepared to take into account the investment objectives, financial objectives or particular needs of any particular person. Before making an investment decision you should carefully consider, with or without the assistance of a financial adviser, whether such an investment strategy is appropriate in light of your particular investment needs, objectives and financial circumstances.

Newton Investment Management Limited is exempt from the requirement to hold an Australian financial services licence in respect of the financial services it provides to wholesale clients in Australia and is authorised and regulated by the Financial Conduct Authority of the UK under UK laws, which differ from Australian laws.

Newton Investment Management Limited (Newton) is authorised and regulated in the UK by the Financial Conduct Authority (FCA), 12 Endeavour Square, London, E20 1JN. Newton is providing financial services to wholesale clients in Australia in reliance on ASIC Corporations (Repeal and Transitional) Instrument 2016/396, a copy of which is on the website of the Australian Securities and Investments Commission, The instrument exempts entities that are authorised and regulated in the UK by the FCA, such as Newton, from the need to hold an Australian financial services license under the Corporations Act 2001 for certain financial services provided to Australian wholesale clients on certain conditions. Financial services provided by Newton are regulated by the FCA under the laws and regulatory requirements of the United Kingdom, which are different to the laws applying in Australia.

Explore topics