Strategy
Is COVID-19 Rocking Capital Market Foundations?
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Governing through the crisis
Behaving badly in this crisis won't be easy to shake off, and
nearly half thought the economic shock would result in more
unethical behavior. Most agreed that regulations should not be
relaxed to speed a recovery; and companies taking public money
should not pay dividends or executive bonuses; but stopped short
of suggesting a ban on short selling.
Impact on employment
Job losses have been one of the more shocking human statistics in
containing COVID-19, but CFA members say it is too early to tell
how this will play out longer term for the sector. The report
found that most firms are freezing hiring for now. Equally, a
"signficant proportion" in the profession are extremely worried
about short-term job security. Half of UK firms reported no
change to hiring plans, with just 10 per cent reporting any
downsizing. But given that data was collected in April, this
sentiment may not hold true in late June.
What about market volatility?
Again, too early to tell. Most members said that they were still
analyzing volatility before making any strategic allocations or
were not seeing any significant impact yet; but a quarter in the
UK said they had already made significant changes to allocations.
Most managers acknowledged that liquidity was down and agreed that central banks were doing a good job of steadying that downward trend. But members were divided on whether aid should continue in the recovery or be stopped soon to allow free markets to take over. Only a minority in the UK thought that markets were heading for a severe liquidity shock, leading to fire sales and dislocation. About half the members globally didn't want regulations relaxing to bolster trading and liquidity, and there was overwhelming support to review ETFs activity over the past few months to look at any deeper impact.
Learned so far
Not surprisingly, managers want regulators to double down on
educating investors about exposure to fraud and the industry as a
whole to step up vigilence. While most didn't favor any security
market holidays, some in the UK argued for a temporary stay for
companies reporting changes in their financial circumstances.
Views on whether the crisis has changed much in the active versus passive debate showed around half in the UK seeing the steady shift toward passive investing unlikely to be reversed.
About the survey
The survey was sent to the global membership of CFA Institute
between April 14 and 24. 167,312 were invited to participate of
which 13,278 provided a valid answer, giving a total response
rate of 8 per cent.