Morningstar runs the numbers

We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 27 March.

Lex Hall

30 March 2020

We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 27 March.

2 per cent

That's the amount by which global GDP will drop in the wake of the coronavirus crisis, says Morningstar. However, markets are too pessimistic, extrapolating the weak economic outlook for too long, analysts say in a special report. They argue a treatment is likely to take the edge off the coronavirus scare from late 2020, with a vaccine available as soon as mid-2021. "An abatement in active cases coupled with treatment and vaccine breakthroughs are potential catalysts for a change in market sentiment."

US$8 trillion

The US Federal Reserve's balance sheet could increase to over US$8 trillion, from the current record US$4.7 trillion as it seeks to support the US economy. "It is likely central banks will be required to purchase bonds from governments to monetise the economy," Morningstar head of equities research Peter Warnes. "Central bank balance sheets will move to levels previously only thought of as fictional."

40 per cent

That's the amount of income banks would have to lose for their dividends to come under threat, say Morningstar analysts. It's going to be bad for the banks, as it is for everyone, but not as catastrophic as investor reactions might suggest. For one, the banks are much better placed than they were in 2008. "A recession will bring pain to banks' earnings, but just as in the past, the banks are strong enough to get through," Morningstar Australia banking analyst Nathan Zaia says. But at the same time, caution is advised.

30 per cent

That's the amount by which global stocks are undervalued, according to Morningstar. Earlier this year, the market fair value of Morningstar's global coverage universe was overvalued by 7 per cent. Opportunities abound, offering investors material margins of safety. Over half of Morningstar's global recommendations are 4- or 5-star ratings.

$7 billion

That's the amount traded in Australian ETFs over the month of February—a record. Data from ETF provider BetaShares shows that while the industry contracted in February, as share prices fell sharply towards the end of the month, trading value reached a monthly record: more than $7 billion traded in Australian ETFs for the first time. The high volumes mirrored trading patterns in ETFs globally, BetaShares says, with investors seeking out the liquidity of ETFs during volatile times to express both bullish and bearish views.