China is winning in the Covid recovery, says BlackRock Managing Director
Speaking at Calcalist’s ‘Investment Amid Uncertainty’ conference, Russ Koesterich discusses China’s V-shaped recovery and how the upcoming U.S. election will impact investments.
BlackRock Managing Director and portfolio manager, Russ Koesterich, joined Calcalist’s ‘Investment Amid Uncertainty’ conference to discuss how firms have recovered from the blow brought on by the coronavirus (Covid-19) pandemic. Notably, he highlighted which industries and countries will have a more positive outcome, and which still remain uncertain.
“One of the aspects of this recovery that investors should internalize is that it will be uneven, and it will occur in a different place in different parts of the world, and in different sectors of the economy,” Koesterich told host Yarden Rozanski. “Some parts of the economy - whether it’s technology, housing, or healthcare - will have an easier time bouncing back than other economies such as hospitality, travel, or energy.”
Covid-19 has had an undeniable effect on the world, and markets have started to demonstrate which sectors are surviving versus those that will require a few more years of time or governmental assistance through stimulus packages. Koesterich admitted that while some industries are seeing healthy recovery, others, such as air travel, have seen a complete “collapse.”
In the race to return to normal, it appears that China has seen the most promising signs of a ‘V-shaped’ recovery, meaning that it will be quick and considered the best case scenario after a sharp decline. He highlighted how China and its surrounding countries are “already seeing significant improvement,” whereas other emerging markets, such as Turkey, Brazil, or South Africa continue to struggle.
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“They’re still struggling to contain the virus, but there’s also the additional challenge that many of those emerging markets are also exposed to the commodity market. Parts of those, like energy, are coming back slowly and it will be a challenge for those economies.”
The energy market has seen a slow recovery in part due to the fact that people are working from home and traveling less. According to Koesterich, Blackrock has been cautious in its involvement with the energy sector because of the “demand destruction” caused by Covid-19. “When you think about the changes we’ve seen, all of this translates into much slower demand for oil throughout the world and this is a challenge,” he explained. He partnered the sudden crash in demand for oil with the long-term efforts of countries around the world also working toward carbon neutrality. “This represents a long-term headwind for many energy firms.”
Of course, the world is waiting on the results of the US presidential election and how the country expects to continue its recovery process. While Koesterich highlighted that there is a tendency to exaggerate the effects of the political parties on the markets, complications can still arise despite who lands up in the White House. “The U.S. isn’t a parliamentary system, so it’s possible that Biden can win but Republicans maintain control of the Senate, which would create a very different set of circumstances, it would be a lot more difficult to pass legislation,” he added.
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