Pearl Impact Capital Blog Q2 2020 Market & Performance Review

There is a disconnect between the crashing economy and rising stock prices. The second quarter likely saw the largest decline in global GDP in history, yet stocks jumped double-digit percentages. The International Monetary Fund again downgraded expectations for the global economy in June, projecting negative growth for all regions of the world in 2020, the first in the history of its forecasts. So why have stocks performed so well recently? This is mostly about the unprecedented stimulus that is being pumped into the economy, and ultimately finding its way into the stock market. Central banks around the world are perfecting the knack of backstopping almost any tradable asset, and investors have continued to bet on increased stimulus from policymakers in the face of the pandemic.While continuing fallout from the coronavirus leaves room for shocks over the rest of 2020, risky assets look set to keep climbing as data hints the worst is over and policy makers drown any chance of systemic meltdowns with more cash. Still, the economy is still far from healthy and a full recovery will take time. With the economy challenged by a global pandemic, the highest levels of unemployment since the Great Depression, and an uncertain outlook for businesses across the country, we could be on the verge of stagflation-higher inflation and sluggish economic growth-for the first time since the 1970s. Other looming concerns include climate change, slowing population growth in the developed world, slowing productivity gains, and record public and corporate debt levels.As a sustainable global investor, PIC strategies are well diversified and built to withstand the aforementioned risks. Our continued focus on quality companies with strong balance sheets and robust environmental, social and governance characteristics should enable our portfolios to endure.