As the COVID-19 pandemic rages, US banking firm Goldman Sachs published an economic review on March 22, 2020 that expressed an optimistic outlook regarding the situation.

As new screening kits become available, new therapies and vaccines are introduced, unexpected vaccines are found, and the private and public sectors inject more resources in the healthcare system, fear will decrease, the firm says. In the United States, Goldman Sachs notes the positive effect of efforts, reflected in the growth in testing in recent weeks. It also sounds an optimistic note about diagnostics.

Goldman Sachs reports that the Milken Institute has monitored work on therapies and vaccines at different stages of development on the global scale. The Institute currently estimates the number of therapies at 58 and the number of vaccines in the research pipeline at 43.

Third economic boost

Goldman Sachs also says massive monetary and budget policy stimulus on the global scale, will partly offset the economic impact of Covid-19.

The rapid and spectacular plunge in stock prices often reflects financial markets’ anticipation of a slump in the economy, triggered imminently by containment efforts across the US. The market thus foresees more bad news such as a higher than expected confirmed contamination rate of the virus, steep declines in GDP growth and corporate earnings, and spiralling unemployment.

Economic and earnings growth are expected to be bleak in Q2, Goldman Sachs says. When the pandemic blows over later on the year, markets can focus on returning to positive territory. If the United States successfully vanquishes the virus in the coming months, economic activity should resume in the second quarter and remain vigorous until 2021, the banker forecasts.

Goldman Sachs recommends that its clients look beyond the rocky road and favour opportunistic strategies such as maintaining or even increasing their risk exposure. Given the recent market drop, the firm thinks that the compensation for this risk-taking is justifying a slow increase in exposure, as long as investors have excess liquidities and keep appropriate strategic asset allocation in mind. They point out that “appropriate” entails conditions that would allow the client to remain invested.