Navigating in Uncertainty

July 2020

The COVID-19 pandemic swiftly affected global economies and markets in early 2020, causing significant volatility in the capital markets.

While equity and debt prices have bounced back dramatically from their March lows, many investment professionals believe considerable risk remains as evidenced by record-high cash balances among funds. Uncertainty remains connected to multiple pandemic-related issues, including the potential for a resurgence in cases as economies reopen. However, there are also numerous questions about how the global economic recovery will play out as stimulus eventually ends and as people change their behaviours — some for just the near term but others potentially permanently.

LodeRock Advisors conducted a survey of its Canadian institutional contacts to better understand how their thinking has changed in a COVID world.

The survey focused on four main areas:

  • The profile of the economic and market recovery
  • The outlook for capital structures and capital allocation.
  • The potential impact of COVID-related themes.
  • How companies should focus their communications efforts going forward.

This publication details our findings. In general, investors remain cautious with most concerned about the impact of COVID-19 on the economy. Almost all pointed to the autumn as an important timeline as government stimulus will end and new COVID-19 cases could see a resurgence. This viewpoint is significantly at odds with the market’s incredible rebound, adding further to the uncertainty. Investors feel strongly that companies should focus on de-levering their balance sheets in anticipation of potential future pandemics. COVID-based themes such as online commerce, remote working and supply chain restructuring were also top of mind.

Do these themes apply to your company? Finally, there was a strong view that communications strategies needed to adjust by providing more context on the business environment in lieu of guidance.

This is clearly a time of potentially significant change. LodeRock Advisors endeavors to remain informed about institutional investor sentiment as we help our clients formulate impactful capital markets communications strategies. Our key conclusions from this survey suggest there is an opportunity for companies to adjust their messaging and, in the process, gain greater credibility with the market. We think now is a time to be informed about how the market is shifting, and to be ready to respond.