Prescient briefing: Scenario planning amid the Covid-19 crisis

Prescient’s Bastian Teichgreeber.

Sponsored – the following by Bastian Teichgreeber, Head of Asset Allocation at Prescient Investment Management:

Every business has to navigate tough and uncertain conditions at times and the COVID-19 crisis is no exception. From investment managers operating in volatile financial markets to winemakers dealing with lockdown restrictions on sales, we are all grappling with the unknown and the long-term impact on our businesses.

As investment managers, we have found it helps to plan for multiple outcomes and to accommodate for different scenarios – drawing a map of what the future may look like in the months and years ahead. We are planning and positioning the business to deal with any risks that may arise.

In preparation for a post-Covid future, Prescient Investment Management recently developed three possible outcomes: a baseline which we expect to be the most likely, a best-case scenario and a worst-case.

Our baseline forecast assumes a levelling off in infections during June and onwards after reaching a peak in May. In this scenario, the South African economy would experience a U-shaped recovery within two years.

Our most optimistic scenario is a V-shaped recovery based on a series of positive surprises, including the development of a vaccine in the short-term, and the economy returning to pre-crisis levels within the next 9 to 12 months.  The most pessimistic is the L-shaped recovery based on a second wave of lockdowns in response to another spike in infections. In this event, the economy would remain in recession for the foreseeable future.

It is not ideal for any business to face such unpredictable and diverse possible outcomes, but as a 22-year old business, we have faced tumultuous times before and come through them. When the 2008 financial crisis struck, it seemed like the end of the world as we know it, yet the equity market went on to experience its longest rally in history.

With these three scenarios mapped out for the current crisis, we believe Prescient is firmly positioned to respond proactively and decisively to any risks that appear in the months and years to come. Our preparedness also puts us in the best position to deliver on our commitment to provide our clients with consistent investment returns no matter what the financial markets and economy are doing.

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Disclosure:  Prescient Investment Management (Pty)Ltd is an authorised Financial Service Provider (FSP 612) under the Financial Advisory and Intermediary Services Act (No.37 of 2002). Please note that there are risks involved in buying or selling any financial product, and past performance of a financial product is not necessarily indicative of the future performance.