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Managing Partners Group Sees Equities Plunging By a Fifth

The corona virus outbreak is likely to spark a bear run in equities that will knock up to 20% off their value, according to Managing Partners Group (MPG), the international asset management group. The virus can be expected to inflict significantly more casualties now that it has started to spread in Italy, which is part of the Schengen Area and the control of movement of people within the EU cannot be as draconian as the stance that was taken in China to control the Wuhan outbreak, says Jeremy Leach, Chief Executive Officer of MPG.

“Equities have been overpriced for some time and the financial markets have been waiting for an event like this that will drive an overdue correction,” he said. “Europe is not capable of restricting the spread of the virus like China and now northern Europe and the US will be vulnerable. Whilst the potential mortality rates for the virus appear to be quite low, this crisis is going to get worse before it gets better. The impact on the Chinese economy has already been severe and if the virus continues to spread in Europe then the global economy will suffer in the same way. Equities will continue to slide for six weeks or more until the cold weather breaks and drops of 20% or more are realistic with bear runs.”

Research commissioned by MPG1 and published last October found that nearly seven out of 10 (68%) institutional investors expected a significant correction of at least 10% on global stockmarkets by August 2020. This included 16% who expected a correction to happen by February 2020.

A likely reason for such a correction was economic problems in China, according to 57% of investors. Other reasons cited included: the US stock market overheating (41%); political problems in Europe (34%); and economic problems in the Eurozone (29%). More than half (53%) expected a global economic recession in 2020, with 28% expecting it in H1 and 25% in H2. One in five (20%) expect it to happen in 2021.

MPG’s Vita Nova Hedge Fund famously divested almost entirely out of equities last year.

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