Coronavirus: Portfolios should be well-diversified – Deutsche Bank

Italy has put 16 million people in Lombardy and 14 northern and central provinces under quarantine. The Italian economy is likely to see a technical recession as the economic powerhouse of the country is affected until 3 April. Gerit Heinz, Global Chief Investment Strategist at Deutsche Bank, recommends what to do in this case. 

Key quotes

“Overnight Italian PM Conte issued a decree imposing quarantine measures on Lombardy and 14 other provinces in the North and Center of the country.” 

“Lombardy accounts for 22.1% of Italian GDP (2018 numbers) and the affected regions belong to a large extent to the industrial core of the country. While roughly a quarter of the population is affected, the respective regions and provinces could account for one third of the country’s GDP. The measures will last until 3 April.”

“Italy has seen a negative growth number of -0.3% qoq in Q4 2019 and a technical recession seems unavoidable. But the impact of the COVID-19 spread will have a broader impact and global growth is likely to take a hit in the first half of the year pushing full year 2020 growth rates down as well.”

“We expect volatility to continue and apart from the short term noise it remains important to focus on mid to long term goals. Portfolios should be well diversified along the lines of our recommended asset allocation, where we have cautious stance. While further setbacks are possible, given latest newsflow, markets could also react to coordinated counterbalancing measures, why it remains important to follow a robust asset allocation process.”