Every quarter, Canterbury's Outsourced CIO committee shares their observations of the market that impact the management of our discretionary portfolios in the Canterbury Outsourced CIO Commentary.
The global economic contraction triggered by the COVID-19 virus has occurred at a greater speed, scale, and breadth than any other recession since World War II. In the 1970s, we had the recession driven by supply-driven oil-price shocks caused by production cuts. In the early 2000s, we had monetary tightening in response to inflation, and in the late 2000s, we had an unwinding of large-scale financial imbalances.
The current economic crisis has been a deliberate policy-induced cessation of economic activity to suppress the spread of the COVID-19 virus starting in mid-March. The result has been a dramatic and rapid demand, supply, and financial market shock occurring simultaneously, interacting with and magnifying each other. In the U.S., GDP declined by 4.8% in the first quarter of 2020. As the virus spread globally, the suppression shocks hit both the supply and demand side across a large range of industries, including recreation, travel, tourism, and large portions of retail. Where during previous economic downturns manufacturing activities faced larger swings, this downturn has had a disproportional impact on services. Social distancing measures have halted a large portion of economic activity that requires person-to-person contact.