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LONDON – Avonhurst’s Head of Global Political Strategy, Tina Fordham, has said the corona virus pandemic will create unprecedented challenges for global leaders and financial markets – but also that it won’t be ‘the 1918 influenza combined with the 1929 crash’.
Fordham, who was Citibank’s Chief Global Political Analyst and has over 20 years’ experience advising institutional investors, corporate boards and international organisations about global political developments and their implications for markets and the investment environment, has recently been seen commenting on the political and economic fallout from the crisis on Bloomberg TV and CNBC.
Says Fordham: “Corona virus is changing the 2020 outlook materially, economically, societally and in the markets. We need to assess the likely impacts of a crisis that we have never seen before – one that is potentially worse that the 2008 debt crisis.
“This is a market event combined with a health crisis. However, although people are saying this could be the 1918 influenza combined with the 1929 crash, we currently have much better systems in place, be it social safety nets or other stabilizers. That’s not to say it won’t have a significant impact. Forecasts from economic institutions are saying that it looks like we have already tripped into an international recession, which will test a system already under strain.”
Fordham says the crisis will impact everything from President Trump’s re-election chances to Brexit negotiations and long-term social and economic measures.
Fordham comments: “There will be challenges globally for all incumbents. Most market participants expected a second term for President Trump. He is still marginally the favourite, but the political calculus is changing, and his re-election bid will depend on how the public perceives his administration’s response to this crisis.
“Regarding Brexit, we need to be prepared for there to be a delay, because most governments can only do one thing at a time and dealing with this crisis will probably be what the UK can do. It might force more cooperation with Brussels and might serve as a catalyst to see the UK Government walk back its rhetoric on Brussels.
“There are also questions about whether this crisis could result in measures that later become permanent – this has happened many times in history, such as the introduction of social security after the stock market crash, and new banking regulations after the last financial crisis.”
Fordham’s Avonhurst colleague, Gavin Barwell, who was Chief of Staff to the Prime Minister from June 2017 to July 2019, says that the UK government must improve its communication strategies and will need to effect behavioural change to tackle the crisis.
Comments Barwell: “The UK Government has been an outlier in terms of a strategy and has had a real communications problem, as some of its potential solutions were being briefed out anonymously to journalists. The most important thing in terms of an effective government response is the level of trust people have. It is vital that people hear directly from the Prime Minister and the senior scientists who are advising him. It is good that they have now committed to the Prime Minister doing a daily press conference.
“An indication of how rapidly this situation is evolving is that the economic package that the Chancellor announced in the Budget already feels out of date. The fiscal package was about £7 billion in support for businesses, but clearly a larger intervention is required to support those who won’t get paid work and the large number of businesses experiencing cashflow issues and it was good to see the Chancellor take further action on Tuesday.
“The combined public health and economic challenge make this the biggest crisis the UK Government has faced since the Second World War. Whether or not the Government’s strategy works will depend on whether they can convince the public to follow their advice.”
Sean West, senior advisor at Avonhurst and co-founder of knowledge economy tech company ProfeTech, believes that the US response will be hampered by political in-fighting, but will ultimately deliver big stimulus: “Even though this is a public health and market crisis of epic proportions, I would not expect straightforward policy making from Washington.
“Key players like Mitch McConnell and Nancy Pelosi will both maximize their opportunity to roll as much into the moving stimulus packages as possible and to prevent the other party from getting items that would be clear political wins.
“Both sides also know this package has to move because of the scale of the economic calamity, so they can actually accept a few rounds of battle before accepting a final deal without fearing that they jeopardize the passage of a deal. They may take markets for a ride, like during the financial crisis but will ultimately deliver over $1 trillion in stimulus.”
As an advisor of sophisticated capital clients, Avonhurst is seeing market operators take pause to assess these rapidly unfolding developments.
Avonhurst’s CEO Jonathan Bloom, comments: “It is important to consider how we will be impacted by these challenges posed today. The political strategy side of our business looks at how governments respond and how markets are being affected globally. This is how we use our connectivity to help clients navigate these challenges. In financial, real estate or corporate activity, everyone is taking a pause. We’ve seen some clients say on the new money side that they are taking 2-3 weeks to reflect on the market and consider their options. Also, it has been the case that sophisticated capital has found opportunity in this challenging market. Clients are both protecting and deploying capital in opportunistic ways.”
Fordham continues, “Policymakers are adopting a ‘war footing’ as the massive public health crisis collides with an economic and financial crisis. They are invoking long-dormant powers to requisition key items and premises, potentially rationing goods and centralising authority. It is a time unlike any other.”
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NOTES TO EDITORS
Launched in July 2019 with a substantial client portfolio, Avonhurst is dedicated to meeting the changing needs of sophisticated capital by providing a bespoke offering comprising legal, legislative / political risk advisory and capital services. A group of market-leading founders and influencers from the legal world have created a revolutionary advisory business dedicated to helping funds, capital providers, corporate borrowers and issuers, and secured lenders, navigate the complexities of ever-changing markets.
Tina Fordham has been named in the Top 100 Geopolitical Experts (alongside Condoleezza Rice) and the FN’s Top 100 Most Influential Women in European Finance. Tina was also appointed to the UN’s High- Level Panel on Women’s Economic Empowerment and a #1 ESG ranking from Institutional Investor. Her ground-breaking career includes being appointed to the United Nation's first High-Level Panel on Women's Economic Empowerment (which also included IMF president Christine Lagarde), and speaking at the United Nations, Davos, the Milken Institute, World Bank, and Fortune Most Powerful Women, as well as serving on the International Advisory Boards of the think tank Carnegie Europe, and the School of International and Public Affairs at Columbia University.
Sean West is a Senior Advisor to Avonhurst and member of its advisory board. He is co-founder of ProfeTech, a technology company which builds products for the knowledge economy, providing embedded advisory to a select group of start-ups, enterprises and investors. Prior to that, Sean spent more than a decade building multiple businesses at Eurasia Group. He was the founding CEO of the firm’s innovation business and founded and fronted Eurasia Group’s market-leading proposition in the US political risk space.
Gavin Barwell served as Chief of Staff to the Prime Minister from June 2017 to July 2019, and was the Member of Parliament for Croydon Central from May 2010 until June 2017. In October 2013, David Cameron appointed him as a Government Whip and subsequently promoted him within the Whips Office. Between July 2015 and June 2016, he was responsible for day-to-day management of business in the House of Commons, giving him an unparalleled understanding of how Parliament and the legislative process works. In July 2016, Theresa May appointed him as Minister of State for Housing and Planning and Minister for London at the Department for Communities and Local Government.