Economists are not only dealing with unprecedented market moves and policies, but also with new sources of non-financial information and data.
Money management executives agreed that the current situation is difficult to read since outcomes depend entirely on information coming out of the worlds of science and virology.
"We have to be very humble about our abilities to predict that," said Karen Ward, London-based chief market strategist for Europe, Middle East and Africa at J.P. Morgan Asset Management. "We just don't know how long the situation will last. That humility needs to come across in our allocations."
For economists, "this shock is of titanic proportions; there are no rules," said Peter van der Welle, strategist at Robeco Institutional Asset Management in Rotterdam, Netherlands. "This is not a classic-style recession. That makes it very difficult to navigate."
For the first time, science is leading economics. "Health-care professionals are determining in some way also how the economic recovery path looks. If they give the all-clear signal, lockdowns will be removed and people can get back to work. Science at this point in time really trumps economics," he said.
The cause of the current economic crisis — beyond the coronavirus itself — is also different to previous financial crises.
"Usually you think about policymakers doing whatever it takes to limit economic damage, whereas in this case it's to save lives and it means economic pain," said Richard Barwell, London-based head of macro research at BNP Paribas Asset Management.
But while the focus on virology is a new task, economists are at least used to wearing different hats. "As an economist in the financial sector we're frequently facing these kinds of challenges," said Mauricio Vargas, senior global economist at Union Investment Institutional GmbH in Frankfurt. "In the past we had to be a political scientist to analyze the dynamics that led to the Brexit vote (and the election of President Donald) Trump."
And while it's not the first shock to come from the health-care sector — with the Ebola virus in Africa and the 2002 SARS outbreak that originated in China both having an impact on markets — "these were local events. And we're facing a situation with a global pandemic and that's very different. The biggest problem is not that we have to ask scientists about their opinion — that's a very important pillar — but the problem is the lack of historical equivalents," Mr. Vargas added.
But a lot of analysis will come out of this situation, said Paul Gruenwald, New York-based global chief economist at S&P Global Ratings.
"You'll see a flurry of work — as with all crises, it will spawn a branch of the literature on economics and pandemics. The links between health crises and macroeconomics, which are largely non-existent, will be developed. Economists spend a lot of time thinking about financial crises that come from inside the economic system," but nobody has yet thought much about "a global pandemic that takes down big chunks of the global economy," he said.
