Crisis speeds up threats that were expected years from now

The coronavirus pandemic and subsequent lockdowns have intensified a number of threats to the global economy or have reversed long-term trends.

"This is a much different moment where these tectonic forces we were tracking on horizons we were thinking were a few years or a decade (away) have accelerated and become today issues," said Mike Pyle, managing director and global chief investment strategist at the BlackRock Investment Institute, New York. "Choices that investors and clients will be making are as much long-term allocation issues that will have to stand the test of (longer periods) of time … as shorter calls."

Issues such as deglobalization have been exacerbated by the COVID-19 crisis.

"The story of the past 25 years has been … of greater integration of financial markets, flow of people and workers around the world. And that looks to be very significantly challenged or even reversing in the period of time ahead," Mr. Pyle said.

Exhibit A of that is the U.S.-China relationship, which has been challenged the past several years. Regardless of who wins the U.S. presidential election in November, "we are likely to see a more competitive and in some ways more rivalrous relationship," Mr. Pyle said.

Along with the U.K.'s vote to leave the European Union — with the fast-approaching end of a transition period during which time the U.K. and the EU must reach an agreement — the U.S.-China spat shows movement toward a more fragmented global economy.

That means countries or regions will be "churning their own path, and as a result (we will) see a breakdown in economic and financial performance across the world" over the long term, Mr. Pyle said.

The coronavirus pandemic is also exposing inequality across the globe."Inequality between nations had been falling the past couple of decades as the frontier markets were being lifted … out of poverty," said Megan Greene, global chief economist and senior fellow at the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School, Cambridge, Mass.

Inequality within countries has also risen, Ms. Greene said.

"There were forecasts for more trade tensions, industrial policy, all coming through, but (they have) been exacerbated by this crisis," Ms. Greene added.

And while economists agreed that scars will remain on financial markets, they also believe that the damage had already been done — only deepened by the coronavirus pandemic and its financial impact.

"There should be a recognition that we were already in a bad place in the global economy — global growth was already slowing, mainly in large economies," with emerging and developed markets showing weaker growth, said Dambisa Moyo, global economist and author, based in New York.

There was also "too much debt on government balance sheets, negative interest rates … the GDP story was not great and the public policy response story was also in a bad place," Ms. Moyo said. "In that respect, the COVID pandemic has essentially accelerated a bad situation. The (Congressional Budget Office) already a number of years ago cautioned that by 2030, the U.S. government would not be able to sustain" Social Security and Medicare, she added.