Far-reaching effects with negative interest rates the new normal

With imminent recession predicted by financial forecasters, as a result of the coronavirus outbreak, the effects are likely to reshape the way people live and do business on a mass scale, according to analyst firm deVere Group.

The likelihood of global recession on a short-term basis now seems very high as multiple countries are in lockdown and global supply chains grind to a halt. On Sunday, the U.S. Federal Reserve announced another interest rate cut on Sunday – its second emergency measure this month.

“Any way you look at it, it’s now almost certain that there will be a coronavirus-triggered recession as both global supply and demand are impacted. We can expect this recession to be deep but short. The slowdown will be temporary because it’s not caused by deep-rooted problems and imbalances in the economy, rather by a wholly unexpected shock that’s gripped the world,” Nigel Green, CEO of deVere Group, said.

Negative rates

One important outcome is likely to be a move towards zero or negative interest rates on a widespread basis.

“Every recession produces a new world. This one will too.  A Covid-19 recession is likely to fundamentally shift how we live, do business and invest. We’re moving towards an era of negative interest rates. The second cut of rates, now at zero, by the Federal Reserve – the world’s de facto central bank – suggests that the U.S. could soon join peers in Europe and Japan by adopting negative interest rates,” Green added.

Fourth Revolution

The coronavirus outbreak is now expected to speed up the so-called Fourth Revolution, which is fuelled by new technologies, such as Artificial Intelligence and mobile supercomputing.

New industries are expected to emerge with both winners and losers.  This will mean job losses in some sectors and huge, possibly unprecedented, job and investment opportunities in others.

 “The disruption and shifts will underscore that we live in a time of great capabilities and great promise.  But to build and protect their wealth as the world adapts to a new era, investors should be revising their portfolios to mitigate risk and take advantage of the opportunities.”

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