Covid-19 crisis is a ‘shared shock with shared solutions’, says Invesco

As countries worldwide go into lockdown in order to contain Covid-19, Invesco is urging greater international cooperation and that the crisis is viewed as a “shared shock with shared solutions.”

The Covid-19 virus continues to spread throughout Europe, the UK, Canada, and the US, and economic activity is grinding to a halt in some sectors as demand and activity have been sharply reduced in favour of basic needs.

This means that both local economies and the global economy have been affected in a growing number of sectors, including restaurants, entertainment, transport, and mobile phone mobility data. 
 
Global investment management firm Invesco, says that a three-pronged policy response is necessary to limit the spread of coronavirus as well as its economic impact: public health policy to help contain the virus, monetary policy in order to promote financial liquidity and functionality, and fiscal policies that can help contain economic damage.

“China’s measures — locking down parts of the country — have been described as draconian, but they were effective: China’s new infections have dwindled. The ongoing issue here is that Western democracies — which prize freedom of association, movement, and choice — are reluctant to take or enforce such measures,” said Kristina Hooper, chief global market strategist at Invesco.

Markets appear to be experiencing a lack of confidence in the policy responses in Europe and the US, and that seems to be continuing into this week, in Invesco’s view.

Hooper continued: “South Korea has also taken impressive measures to stem the spread of the virus in its country, including extensive, early, and exhaustive testing — its most innovative being drive-thru coronavirus testing. This approach appears to have been very successful, both in containing the virus and in containing fatalities, thanks to early action and mobilisation of treatment resources.”

According to Hooper, markets want to see that policymakers are willing to step in where markets are failing. “They want to see functional governments, independent central banks, and global coordination among policymakers,” she said.