Markets need to accept that it could take more than 2 years to get back to normal, a senior Citi banker warned
- David Bailin, chief investment officer of
Citi's private banking arm warned that marketshave yet to price in the prospect of a second wave of coronavirus infections later in 2020.
- "In the event that we have a very significant second wave of disease in the United States that cause a further shutdown of the
economy... that clearly is not priced into the market," he told CNBC.
- Bailin says US stocks have not factored in that it may take up to 2 years to recover from the virus and return to normality.
- Visit Business Insider's homepage for more stories.
One of the most senior staff at Citi believes that markets haven't yet priced in the possibility that there could be a second wave of coronavirus infections around the world, or that it could take two years for the world to return to normal.
David Bailin, Citi Private Bank's chief investment officer told CNBC's Squawk Box Asia over the weekend that he fears markets have not yet acknowledged the prospect of a second wave of infections triggering another shutdown of the US economy later in the year.
"In the event that we have a very significant second wave of disease in the United States that cause a further shutdown of the economy ... that clearly is not priced into the market," he said.
He also suggested that markets may be underestimating just how long it might take for things to return to normal from the virus.
"The other thing that may not be priced into the market is the fact that this virus may take another 18 to 24 months to really cycle through the globe, and ultimately have a vaccine," Bailin said.
Markets have been hugely volatile in recent weeks, suffering huge losses in March, before rebounding in April, with investors largely seeing the virus as likely to provide an extremely sharp, but ultimately short, shock to the global economy.
The S&P 500 alone has recovered about 27% from lows seen in March, but Bailin is not convinced that the worst is over yet for markets, with US companies expected to report huge falls in earnings in the second quarter of the year.
"In the second quarter we expect earnings to literally fall by 40% or more across the board, and we don't expect earnings in the United States to get back to their first quarter levels for nine quarters from now," he told CNBC.
The International Monetary Fund warned last week that global GDP will fall by 3% in 2020 due to almost every major economy being locked down. It added that 170 countries will see GDP per capita shrink.
IMF Managing Director Kristalina Georgieva then warned that the impact "may actually be a more optimistic picture than reality produces."
Coronavirus has claimed the lives of more than 165,000 people and infected almost 2.5 million globally.Read the original article on Business Insider
- Towards a Greener Footprint: Prioritising Carbon-Neutrality Makes Good Businesses Sense! Are Indian Firms Making the Transition?
- Netflix confirms an ad supported tier is coming to its streaming service by year end
- Accenture, Cognizant could see revenue growth but a strong US dollar could spoil the party
- Kharif sowing is off to a weak start with extended dry spells and floods
- Best ladder for home use in India