Capital Markets Enter Uncharted Waters: Covid-19 One Year Later – a Global CFA Institute Survey
Monetary stimulus, inflation, the equities run, tax hikes, and socioeconomic consequences: In the aftermath of the Covid-19 crisis, the role of finance in society could be materially affected.
CFA Institute, the global association of investment professionals, today releases Covid-19, One Year Later, Capital Markets Entering Uncharted Waters, a report analyzing the results of a new global member survey from CFA Institute to identify and highlight the critical impacts of the Covid-19 pandemic on financial markets.
The report reflects views from CFA Institute members and charterholders on the structural consequences of the crisis on the economy. It also addresses the potential socioeconomic distortions that may have been caused by the monetary stimulus measures enacted by central banks intended to address the Covid-19 economic crisis.
Key findings:
- A large majority (Global - 65 percent, APAC - 64 percent, Hong Kong SAR – 63%) of respondents believe that an accommodative monetary policy, combined with supply-side constraints, will cause inflationary pressure over the next one to three years. Those respondents are closely split on whether inflation will cause central banks to restrict monetary policy as a result 31 percent (APAC - 31 percent, Hong Kong SAR – 29%) think central banks will switch to a restrictive policy, 34 percent (APAC - 33 percent, Hong Kong SAR – 34%) think not.
- 58 percent of global respondents (APAC - 46 percent, Hong Kong SAR – 45%) agree that the role of government will broaden as a result of the crisis, and the share of government spending in GDP will structurally and materially rise, as will taxes. In addition, 40 percent (APAC - 39 percent, Hong Kong SAR – 36%) agree that the Build Back Better movement and the trend toward sustainable investment products is strong and here to stay.
- 44 percent (APAC - 42 percent, Hong Kong SAR – 45%) of global respondents believe the stimulus measures have created a goldmine for the investor class, widening the wealth gap in society.
- A plurality of 44 percent (APAC - 43 percent, Hong Kong SAR 40%) of respondents globally see the economy of their region recovering in the form of a K-shape, an economic course that affects different categories of people, businesses, regions, and industries in varying ways.
- A plurality of respondents globally (45 percent, APAC – 43 percent, Hong Kong SAR – 43%) expressed the view that equities in their respective markets and global developed markets in general (43 percent, APAC – 55%, Hong Kong SAR – 51%) have recovered too quickly from the market slump in February–March 2020 and are due for a correction within the next one to three years.
Nick Pollard, Managing Director, Asia Pacific, at CFA Institute, comments: “Our Covid-19, One Year Later report highlights a number of important areas of concern where unintended consequences may already be in sight. With authorities ready to do whatever it takes to prevent a liquidity crisis in the markets, the economic stimulus unleashed to address the crisis may well have consequences of its own.”
Mary Leung, CFA, Head, Advocacy, Asia Pacific, at CFA Institute, comments: “Across markets, we are clearly seeing signs of a multispeed recovery together with inflationary pressures, a potential for monetary stimulus addiction, tax hikes, emerging regulatory risks, and questions over the actual financial health of corporates. As our survey reveals, while many governments and central banks have implemented robust and comprehensive plans to meet the crisis head on, concerns are rising as to the eventual unintended consequences of this liquidity infusion.”
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