Credit Suisse noted that the impact of the coronavirus pandemic and its aftermath have yet to be fully realized but remained optimistic about the global recovery.

«We call Covid-19 a once-in-a-century event,» said John Woods, Credit Suisse’s Asia Pacific chief investment officer, during a recent webinar, stressing that challenges remained ahead.

Various countries and regions are undergoing various stages of contagion, containment and recovery, Woods said, with Asia leading the rebound in the containment phase. But this not the case elsewhere such as Latin America where Brazil was a major contributor to the new highs of recorded infection cases, according to the World Health Organization.

«With the highest number of new cases of coronavirus being recorded just over the weekend, I think it’s quite a sobering reality that global cases continue to rise,» he added. «The crisis stemming from the Covid-19 is still a very real risk. By no means have the dangers passed.» 

First In, First Out

The bank believes that the order of recovery by country will be dependent on the order of impact or, as its thesis is entitled, «first in, first out». As the source of the first case in Wuhan, China has also played out as the first to recover from the crisis and Wood believes that its «trajectory has essentially stabilized», leading global growth by a quarter.

But elsewhere, the rebound is expected to lag or even cause permanent damage. Emerging markets are expected to have a gradual U-shaped recovery well into 2021. In the U.S., the unemployment gains made after the global financial crisis (under 4 percent) have been lost and levels could remain at 6-7 percent even by mid-2021.

Still Risk-On

Despite the challenging environment and economic headwinds for earnings, Credit Suisse maintains a small overweight for equities as «positive virus-related news, policy measures, low yields, and generous risk premiums suggest potential for further gains». The bank also sees attractive returns from riskier fixed income assets such as emerging market hard currency bonds, investment grade bonds and high yield credit.

The bank forecasts positive economic growth by the third quarter of 2020 with muted inflation as developed countries open up from lockdowns.