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Article | Executive Pay Matters

The economic impact of COVID-19 (coronavirus)

We can only hope to contain it

Executive Compensation
COVID 19 Coronavirus

By Ryan Lucki , Michael Biggane and Steve Kline | March 19, 2020

Containing the disease will take time while the impact on the economy has been swift

“You can stop the contagion, but the price is a deep hit to the economy.” — Alicia Levine, Chief Strategist, BNY Mellon Investment Management


The spread of the coronavirus (COVID-19) unfolds with alarming speed. As such, hard economic data, to help us understand how deep or protracted the business downswing might be, are limited. But for now let’s start with the obvious data source: the stock market. The past month has been brutal and exceptionally volatile. The chart below tracks the year-to-date shareholder returns across a range of economic sectors through Monday, March 16. Results the past two days cancelled each other out and did little to change the story.

Figure 1. 2020 Total shareholder return by sector, through 3/16/20
Figure 1. 2020 total shareholder return by sector, through March 16, 2020

In January, investment analysts generally expected 2020 to be a stronger year than 2019. Figure 2 shows 2020 earnings before interest and taxes (EBIT) growth versus 2019 actuals. For most sectors, EBIT in 2020 was expected to exceed 2019 results.

Figure 2. 2020 EBIT expectations versus 2019 EBIT growth by sector
Figure 2. 2020 EBIT expectations versus 2019 EBIT growth by sector

We also reviewed how investment analysts’ expectations have evolved since January. To be clear, it’s reasonable to think that the estimates, as of March 10, only partially tell the story, as some are likely already stale. That said, there’s been a considerable decline in expectations, and it is likely to get worse in the months ahead.

Sector YTD change in estimated 2020 EBIT
S&P 1500 -3%
Health care -4%
Utilities -4%
Discretionary -3%
Industrials -3%
Materials -3%
Technology -2%
Real estate -2%
Staples -1%
Financial -1%
Energy -1%
Communication services 0%

Figure 3. Year-to-date change in estimated 2020 EBIT, as of March 10

No one knows how deep the economic impact will be, how long we will spend at the trough or how quickly we can recover. The prospect of a recession is real. Will fiscal stimulus come to the rescue? The Federal Reserve has taken bold action, which should help. We will continue to monitor and report on these issues in the weeks and months ahead.

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For information about steps that North American companies are taking to protect their employees from the COVID-19 pandemic, see our press release (North American companies take steps to protect employees from coronavirus epidemic).

You may also be interested in the Harvard Business Review article co-authored by Willis Towers Watson’s Dr. Jeff Levin-Scherz, which outlines 8 Questions Employers Should Ask About Coronavirus.

Additional information and resources can be found on Willis Towers Watson’s COVID-19 microsite.

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