x Covid-19 and consumer and mortgage finance: It’s not 2008 all over again

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Audience

Covid-19 and consumer and mortgage finance: It’s not 2008 all over again

09/04/2020

We believe that the aftermath of the Covid-19 pandemic will play out quite differently to the global financial crisis. While the past decade was arguably the decade of the corporation, could this be the decade of the consumer? In this paper, M&G’s Specialty Finance team examine the reasons why they believe this to be the case and discuss what that means for investment strategies.

  • The initial market reaction that “it’s 2008 all over again” does not stand up to scrutiny, in our view. It is far too simplistic to assume that investment strategies that worked post-2008 can be replicated successfully in the coming months and years.
  • While the past decade favoured corporations over individual taxpayers, we expect the opposite in this decade.
  • Patience will be rewarded, but opportunities to invest both tactically and strategically in consumer and mortgage credit are already visible and we are executing selectively on them.
  • In the long run, we see an acceleration of European bank deleveraging, potentially catalysed by greater M&A activity and consolidation – resulting in greater opportunities to position as an asset acquirer of performing bank loan portfolios from capital-strapped banks.

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The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.

 
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The value of investments will fluctuate, which will cause fund prices to fall as well as rise and you may not get back the original amount you invested.