Amid Coronavirus Uncertainty, Calamos Global Team Maintains Long-Term Perspective

Global Team Perspectives by Nick Niziolek, CFA

We have not made any significant positioning shifts due to recent market turbulence—most notably, coronavirus concerns. Pullbacks and corrections happen for many reasons, and historically, our team’s patience has been rewarded during these uncertain periods. From a global health standpoint, there is no doubt that the coronavirus warrants deep concern. However, from an investment standpoint, our base case continues to view the coronavirus outbreak as a transitory issue. Moreover, we see the potential for a release of pent-up demand and greater monetary support and fiscal support contributing to a 2H2020 recovery.

• Further signs of an economic inflection could provide an opportunity to increase exposure to cyclical growth areas benefiting from a more reflationary environment.
• At present, while our global and international portfolios have healthy exposure to cyclical growth, they remain overweight to secular growth opportunities. These secular growth names are benefiting from the global lower-growth/lower-inflationary environment that has been in place for most of the past decade. Many are companies with strong moats and favorable secular tailwinds.
• If the coronavirus outbreak were to continue to weigh on global growth and the recovery is more muted, secular growth names should continue to outperform. This is our second most likely scenario at this point, but fundamentally, companies within this cohort are some of the most dynamic.
• Our portfolios are underweight in defensive names. If the global economy were to enter recession or experience a deflationary shock, defensive stocks would outperform. However, the risk of a global recession remains low. Global central banks and governments are aware of the risk coronavirus presents and have telegraphed that they would respond aggressively to an adverse economic impact. If a policy mistake appeared more likely (i.e., lack of a response) and/or the length of the coronavirus outbreak were to extend several more quarters (i.e., more substantial supply shock), the case for defensive names would be stronger.

Conclusion

Investors can be confident that we are monitoring these developments, and we’re ready to adjust the portfolios if we believe the facts warrant a change. At this time, we believe our current positioning is prudent.