It has been a testing first half of the year, as the turn of events has differed markedly from general expectations. The emergence of COVID-19 in China, and its swift spread across the world, has significantly changed the global landscape, and its effects are expected to be worse than the Great Financial Crisis.
Already, global growth projections for the year have been cut and, for the first time, all economic regions except China are expected to slump into a recession at the same time. While recovery is expected in 2021, the effects of the virus are expected to stay with us for longer.
The domestic economy has not been immune from the economic fallout caused by the virus. Even though economic output expanded in the first quarter, the outlook for the rest of the year is less benign as the virus is set to amplify existing growth impediments.
We witnessed multiple currency depreciation in the first half, as weakness in the current account balance along with foreign capital reversals tested the ability of the CBN defends the currency.
Events in the financial markets have also mirrored the current macroeconomic backdrop, as both the equities and fixed income markets have been unable to provide a positive real return to investors. However, even amidst the uncertainty, shrewd investors have been able to unearth value and reap inflation-beating portfolio returns.
In this report, we examine some of the key themes that are set to impact the economy and financial markets in the second half of the year and, as usual, we offer our guidance on how investors can unmask value amidst the scourge.