Reference no: EM132912955

Stage 1:

Zara Chin is the Head of Wealth Management for a large APAC private bank based in Singapore. Zara has access to a large and diversified team of investment specialists including economist, investment bankers, asset allocators, investment specialist teams across multiple asset classes and third fund managers. They need to give advice to a large Family Office client.

The world economy has contracted significantly due in part to exogenous factors. Supply chain disruption is significant and severe. The expectation is for coordinated monetary and fiscal support to cushion the downside and assist with the recovery prolife of the regional (APAC) and global economy. However, clients are concerned about the current state of play in markets and surrounded by the noise.

At the early stage of the global crisis the market is concerned and pricing in a negative return year-to-date. The IMF is already "downgrading" economic forecasts and highlighting they are looking at the magnitude of the stimulus measures. 

Stage 2: Three months later

The global coordinated fiscal and monetary stimulus has been of historic magnitude. Equity markets have begun to recovery in anticipation however the clients (and investors in general) remain concerned.  

Central bank policy makers continue to remain on script and continue to offer additional support for the foreseeable future. Monetary policy evolved to include expanded quantitative easing to complement lower rates and additional government stimulus.   

Zara and her wealth management team need to utilise their various support teams and resources and advise the client heading into the correction and the early stages of the recovery. They prepare investment recommendations and reports, meet the clients immediately and then in 3-months time.

Question:

• In stage 1 what phase (of four) of the cycle are we currently in and what occurs to bond yields (or bond prices) and equity prices?
• What Tactical Asset Allocation (TAA) tilts vs the Strategic Asset Allocation (SAA) portfolio would you recommend.
• Please identify some key partial economic indicators and also some leading economic indicators (LEIs) that you will look at with your team and track going forward.
• Zara and her team need to explain quantitative easing. Please identify who needs to issue more bonds / debt to fund the recovery?