Clockwise from upper left: Fidelity’s Abigail Johnson, Pershing Square’s Bill Ackman, Pimco’s Daniel Ivascyn, Trian’s Nelson Peltz, Ben Meng of Calpers, and Scott Minerd of Guggenheim.
Photo: Reuters(4); Bloomberg News; CALPERSWall Street’s seasoned executives have navigated market selloffs and economic downturns, disruptive hurricanes and even terrorist attacks. Many of them stood at the precipice in 2008, when the financial system they had helped lead faced one of its biggest challenges ever.
Those experiences may bear little direct relevance to the unprecedented challenges posed by the coronavirus pandemic, whose potential devastation remains difficult to comprehend. But for an industry that has always bet on its eventual recovery, they are all it has.
The Wall Street Journal asked some of the financial world’s most-influential voices to predict how the markets will respond to government policies designed to contain the virus’s impact, and how they’re relying on their own past experiences to shape the decisions they’re making as leaders and investors. Here’s what they said.
Scott Minerd
Global chief investment officer for Guggenheim Partners
Mr. Minerd
Photo: lucy nicholson/Reuters“We are running the risk that this will be another Great Depression. Despite the good intentions of the Fed and policymakers in Washington, the programs put in place won’t offset a severe contraction in economic activity. I expect another 10-20% downside in equities, and double-digit high yield default rates within 12 months.
“My experience in all kinds of markets, including the financial crisis, is that bottom fishing is the most expensive sport in the world. Investment-grade bonds have dropped like a rock in just a few weeks: Spreads have more than tripled to 373 basis points. But in the financial crisis [investment grade] bond spreads peaked at 618 bps. Things that are cheap can still get cheaper.”
—Justin Baer
Abigail Johnson
Chairman and chief executive of Fidelity Investments
Ms. Johnson
Photo: brian snyder/Reuters“It’s impossible to predict the direction of the markets. Investors face long odds in trying to time the ups and downs of the markets. Staying fully invested according to your asset allocation plan can give investors an opportunity to participate in the market’s long-term upward trend. Investors need to be patient and disciplined, and have a plan.
“Your plan can help guide you through periods like this. It can help to use what we call the investor mindset, which means staying focused on the long term and using a decision process that is analytical, logical, and grounded in empirical data.”
—Justin Baer
Walt Bettinger
Chief executive of Charles Schwab Corp.
Mr. Bettinger
Photo: Justin Sullivan/Getty Images“A threat to so many people’s economic well being, health and their lives creates a more significant and far-reaching challenge than 2008...
“And in the markets, we haven’t ever experienced a pandemic-driven bear market, so traditional signals about where we are headed may be of little help. That said, we know from history, over time, our country perseveres and its markets rebound. The hopelessness of the financial crisis of 2008 was followed by a historic bull market, but the pivot went almost unnoticed by many investors until we were well into the turnaround. And so throughout this downturn, we are reminding our clients that panic is not an investment strategy and that trying to time the market is futile.”
—Dawn Lim
Ben Meng
Chief investment officer, California Public Employees’ Retirement System
Mr. Meng
Photo: Calpers“We can’t predict the future and we don’t try to. We don’t know how long this market volatility will last, but it reinforces what I know is one of CalPERS’ greatest strengths—our long-term investment horizon....
“The lesson we’ve learned over the years is to prepare for as many potential outcomes as possible, and then stay calm and disciplined and execute on our strategy. We have been preparing for a market downturn like this one. We have a plan and we are sticking to it.”
—Heather Gillers
William Ackman
Pershing Square Capital Management
Mr. Ackman
Photo: mike blake/Reuters“The news about the virus is going to get worse and worse in the next few weeks, but the good news is that people are responding,” William Ackman said in an interview.
In February, Mr. Ackman watched the coronavirus spread in China and thought the only way to slow it was to shut down the economy. So he moved to protect his portfolio, spending $27 million on convertible default swaps as a hedge.
Mr. Ackman called for a 30-day shutdown of the U.S. and told CNBC on March 18 that “hell is coming” and the country wasn’t moving fast enough to stem the spread. Markets slid as he spoke.
Though a full shutdown didn’t happen, Mr. Ackman locked in the gains from his hedge earlier this week by closing it out for $2.6 billion, offsetting his stock losses. Mr. Ackman says he has grown more optimistic, and while his portfolio includes a relatively high level of cash, he has put more money into core holdings. “I think we’re heading in the right direction,” he said, though he added that it’s likely “not going to be straight-line up.”
—Corrie Driebusch
Daniel Ivascyn
Group chief investment officer, Pacific Investment Management Co.
Mr. Ivascyn
Photo: Christopher Dilts/Bloomberg News“We are all facing a truly global and humanitarian challenge that we hope will be a once-in-a-lifetime event. We are working relentlessly to protect our employees and their families while navigating client portfolios through unprecedented financial market volatility.
“The economy is rapidly contracting, but aggressive action by global central banks, coupled with unprecedented fiscal spending in the U.S. and much of the rest of the world, should keep credit flowing, give households and businesses a bridge to recovery and reduce the chances of a more severe depression.
“The 2008 Financial Crisis was a different beast with different triggers but one thing holds true again: The cautious investors who came into this broadly diversified and owning high-quality and liquid assets now have better prospects of a quicker recovery.”
—Justin Baer
Nelson Peltz
Trian Fund Management
Mr. Peltz
Photo: mike blake/ReutersHedge-fund manager Nelson Peltz is currently in Florida, social distancing along with other Americans. When he takes a ride once a day to get out of the house, he likes to drive past a Wendy’s —the restaurant chain of which his fund, Trian Fund Management LP, is the largest shareholder.
While not as many people are using the drive-through as a few weeks ago, Mr. Peltz said in an interview that he’s still pleased to see people lined up to get their food.
Mr. Peltz says the coronavirus pandemic, and the shortage of medical protective gear and other supplies, will fundamentally change supply chains, and that the U.S. will likely see more things being made in America.
In the near term, Mr. Peltz is feeling more upbeat after seeing the stimulus bill pass in the Senate, saying, “the bill as written will help both companies and workers.”
—Corrie Driebusch
Bill Demchak
CEO of PNC Financial Services Group Inc.
Mr. Demchak
Photo: AJ Mast/Associated PressBill Demchak is still coming into his office at PNC’s Pittsburgh headquarters, though the building is almost empty. He has started wearing jeans and sporting a beard.
Many PNC employees are working from home. Branch employees are still coming into work, though the bank has scaled back its branch operations.
“As a bank, we have to be here for all the obvious reasons: helping people defer payments, or make payments, or get new loans,” Mr. Demchak said. “So in effect we’ve drafted these normal people who are used to coming to work and doing their job, and now they’re almost emergency responders. They are people who have the same concerns as everybody else does, and they’re being put in a situation where they can’t necessarily behave like other people who can just sit and ride it out.”
Mr. Demchak makes a point to walk down the street most days to visit employees at two nearby branches. “Frankly you just applaud these employees,” Mr. Demchak said. “I’m really grateful for what they are doing.”
—Christina Rexrode
Write to Justin Baer at justin.baer@wsj.com
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