Investment Strategies

Looking Beyond Lockdowns: Charting The Investment Route Forward

David Amaryan, 24 June 2020


A Moscow-based emerging markets investment manager specialising in long/short event-driven and value strategies discusses his firm's view of future opportunities.

This news service is inundated with predictions about what the next few months may hold as lockdowns unwind. An obvious concern is the chance of a “second spike” in the pandemic and, of course, the scarring to the underlying economy: supply chains disrupted, businesses forced to shut down, uncollected debts, lost education time, and other problems. 

A particularly incisive commentary comes from David Amaryan who is CEO of Balchug Capital, a Moscow-based emerging markets investment manager specialising in long/short event-driven and value strategies. Amaryan has worked in the space for two decades in various international financial institutions in Moscow and New York. He founded Balchug in 2010. The editors are pleased to share these views; the usual editorial disclaimers apply. Email and

To put it mildly, the last few months have been stressful. A dangerous, unfamiliar virus brought human misery and economic catastrophe around the world with stunning speed, forcing governments and businesses to struggle with a growing toll of infections and death, closed borders, soaring unemployment, declining production, wild market fluctuations, negative oil prices and trillions of dollars in fiscal and monetary stimulus. Only a vaccine will end this nightmare, but even so, news outlets and analysts across the world are grimly predicting a “new normal” in which things will never be the same.

Making investment decisions in this turbulent environment can be challenging. When things get too complicated to comprehend, with too many variables, I try to simplify them by asking basic, straightforward questions. This is what we did at Balchug Capital in March 2020.

Is this the end of the world? 
No. This is not a massive meteor heading toward our planet. It is not a nuclear world war. People are not turning into zombies. Humanity has survived and overcome two world wars, the Great Depression, the great financial crisis, the Cold War, various epidemics and pandemics and numerous recessions. We will adapt and move on from the novel coronavirus, too. 

Do we believe there will be a vaccine within a reasonable time?
Yes. Though we are not doctors, we are confident that the sophisticated capabilities of our scientific community, backed by government and private capital, will produce a vaccine, and that COVID-19 will be treated and controlled as other viruses in the flu family are. Already, there are around 100 possible vaccines being developed. We have faith that one or more will soon be successful. 

Will there be a second pandemic wave?
Most likely, yes. As economies reopen, social proximity will return, people will inevitably let their guard down, and conditions will be ripe for a resurgence in the fall.  However, even if there is yet no vaccine, many people will have developed antibodies, and most countries will be much better prepared this time. I would not expect the same widespread economic shutdown again. Another overreaction in the markets is possible, however, which could be a buying opportunity.

Will oil prices stay below $20?
No. As economies reopen, people start driving and flying, and factories and farms step up production, demand will gradually recover. Combined with action from OPEC+, oil prices will probably return to the $35-$45 range.

Do we expect a V-shaped recovery?
Most likely, no. Economies will not go back up nearly as fast as they went down, and there will be continued volatility in the markets for the near term. But as uncertainties decrease, the virus is controlled and public confidence returns, the pace will pick up.

Should we worry about all the debt that is being created?
Not in the short-term. A massive crisis requires a proportionate response. While there is legitimate concern about heaping enormous debt on the next generation, context is important. The difference between a FED balance sheet of $1 trillion versus $2 trillion is not as important as leaving the next generation a functioning economy that can handle the debt. Right now, more fiscal and monetary support helps the economy recover. Yes, there will be a price to pay in the future, but it might not be as high as we think, and without it our legacy to the future will be ruin. As a not so incidental aside, I think climate change, not debt, should be a much bigger worry for the future.

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