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Covid-19 effects will reverberate for years

Defeating this unprecedented global crisis requires a response that cuts across partisan lines and national boundaries.

"When we exit this crisis, the world will be different. Investors' psychology will change. Business will change. Consumption will change. And we will be more deeply reliant on our families and each other to stay safe." - BlackRock chairman and chief executive officer Larry Fink.

WHEN I originally sat down to write this letter, I was in my office, thinking about how to describe the events of 2019 and what BlackRock achieved last year.

Today, that seems a distant reality. BlackRock's offices globally are nearly empty and instead, I write to you in isolation from home, like millions of other people.

Since January, the coronavirus has overtaken our lives and transformed our world, presenting an unprecedented medical, economic and human challenge. The implications of the coronavirus outbreak for every nation and for our clients, employees and shareholders are profound, and they will reverberate for years to come.

The virus has taken a severe toll. It has killed or sickened hundreds of thousands, and even for the healthy, it has dramatically altered daily life and threatened financial security.

For governments, it has presented the astounding challenges of implementing quarantines on a scale never before seen and of responding to the economic and financial fallout from them.

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For the private sector, it has upended how companies operate and the demand for their products and services, with small businesses and their employees invariably shouldering the greatest burden.

And medical professionals, in almost all cases operating with insufficient supplies and a lack of hospital capacity, are faced with wrenching decisions about how to keep the most people alive. These medical professionals, on the frontline in this crisis, are today's heroes.

In my 44 years in finance, I have never experienced anything like this. The outbreak has impacted financial markets with a swiftness and ferocity normally seen only in a classic financial crisis. In a matter of weeks, global equity benchmarks fell from record highs into a bear market.

A market-wide circuit breaker at the New York Stock Exchange, built to give traders a pause and dampen extreme volatility, was triggered for the first time since 1997, then triggered three more times in quick succession.

These conditions were exacerbated by record low liquidity levels in US Treasuries, which serve as a benchmark for pricing risk across the market.

The outbreak has not simply pressured financial markets and near-term growth, it has sparked a re-evaluation of many assumptions about the global economy, such as our infatuation with just-in-time supply chains or our reliance on international air travel. Even more profoundly, people worldwide are fundamentally rethinking the way we work, shop, travel and gather.

When we exit this crisis, the world will be different. Investors' psychology will change. Business will change. Consumption will change. And we will be more deeply reliant on our families and each other to stay safe.

As dramatic as this has been, I do believe that the economy will recover steadily, in part because this situation lacks some of the obstacles to recovery of a typical financial crisis.

Central banks are moving quickly to address problems in credit markets, and governments are now acting aggressively to enact fiscal stimulus. The speed and the shape of these policies are deeply influenced by the world's experience during the global financial crisis in 2008.

I also believe their actions are likely to be more effective and work more quickly since they are not fighting against the same structural challenges as they were a decade ago.

That is not to say the world is without risk, nor to suggest that the market has reached its bottom. It is impossible to know.

There are also significant challenges ahead for heavily indebted businesses, and if governments are not careful in the design of their stimulus programs, the economic pain from the outbreak will fall disproportionately on the shoulders of the most economically vulnerable individuals.

Because of the nature of the crisis and its ability to reach us all, we are reminded of our shared humanity as we tackle this outbreak together. To defeat this crisis, we need a response that cuts across partisan lines and national boundaries.

I have always believed in a long-term view. I have advocated for it in letter after letter. And I believe long-term thinking has never been more critical than it is today.

Companies and investors with a strong sense of purpose and a long-term approach will be better able to navigate this crisis and its aftermath.

At BlackRock, we take a long-term view of markets, and we take a long-term view in the way we run our company. The world will get through this crisis. The economy will recover. And for those investors who keep their eyes not on the shaky ground at our feet, but on the horizon ahead, there are tremendous opportunities to be had in today's markets.

BlackRock's biggest responsibility - now more than ever - is to help our clients navigate this market environment and stay focused on long-term returns.

To ensure we could continue to serve clients around the world, despite the pandemic, we rebuilt BlackRock beyond the walls of BlackRock. On many days in recent weeks, we have had over 90 per cent of our people around the world working from home - managing portfolios, serving clients and building technology.

This is no small task. Our employees are caring for their families and loved ones while also adjusting to remote work and the challenges of isolation.

Making this transition successful has depended on careful planning and robust technology.

But above all, it has depended on BlackRock's strong and deep-seated culture. Our commitment to each other, to our clients and to our shared sense of purpose has bound us together during this difficult period and enabled us to continue to serve our clients and our communities.

Since the emergence of coronavirus in mid-January, the BlackRock Investment Institute has devoted itself to helping investors understand the economic and financial implications of the outbreak and resulting volatility, hosting numerous calls for thousands of people and publishing a steady stream of research and insights.

Our portfolio managers and relationship managers are in close contact with clients through phone calls and video conferences, making sure that our clients are safe and healthy, that they have the information they need and get prompt answers to their urgent questions.

We continue to help clients position themselves to achieve their long-term objectives, and BlackRock's frequent engagements with these clients over time and our deep understanding of their purpose enables us to better serve them in times like these.

For some clients, the recent sell-off created an attractive opportunity to rebalance into equities. Indeed, many of our clients - even those who generally have a heavy allocation to fixed income due to their risk profiles - are looking to increase their equity allocation in this market.

  • This is an excerpt of BlackRock chairman and chief executive officer Larry Fink's letter to shareholders.
    For the full text, go to

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