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Outlook

Q2 2020: Outlook for the COVID-19 EconomyQ22020:OutlookfortheCOVID-19Economy

May 11, 2020

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Webinar Summary

    The precipitous and devastating impact of the COVID-19 pandemic has left no doubt that global economies have entered an unprecedented recession. Investors are now left to ponder what’s next and to contemplate how deep the contraction might be, and how quickly markets can recover.

    Read the transcript

    • –

      [ Music ]

      >>[DESCRIPTION: The title slide has the heading PGIM Responding to a Crisis. The Outlook For the Covid-19 Economy

      >>[DESCRIPTION: The Four speakers are introduced
      Mark Baribeau. Jennison Associates
      Cathy Marcus. PGIM Real Estate
      Nathan Sheets. PGIM Fixed Income
      Noah Weisberger. PGIM IAS

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO:  Hello, everyone. This is your host, Noah Weisberger, and we welcome you to the PGIM Q2 Market Outlook webcast on April 13th, 2020. 
      I am from PGIM's Institutional Advisory & Solutions group. And the webcast speakers, Nathan Sheets, chief global economist at PGIM Fixed Income, Mark Baribeau, head of global equity and PM at Jennison Associates, and Cathy Marcus, global chief operating officer and head of the US equity business at PGIM Real Estate. 
      Speaking for all of us here at PGIM, this crisis is of unimaginable global scale while also immediate and intimate. Our primary concern remains with the health and well-being of all those affected. As professionals, we remain focused on supporting our clients and charting the best course forward. 
      As PGIM CEO David Hunt said recently, we stand by our employees, our clients and our communities. The fundamental PGIM tenant is the independence of the individual asset management businesses. There is no common hymnal from which we all sing. Providing clients with perspectives from across the PGIM ecosystem has never been more critical and nd hopefully, this webcast will provide you with some valuable insights. Before we kick off the conversation, one housekeeping note, this is not a live webcast, but you can email questions to the panelists. That email address is thought.leadership@pgim.com. 
      And with that, let's begin that conversation. 
      Clearly, short-term concerns are top of mind. That said, our goal is to focus on what the investing opportunity set may look like as we emerge from this crisis. History suggests that periods of extreme volatility can be viewed as opportunities. 
      My PGIM IAS colleagues have recently discussed on a webinar that when you look back over the last several decades after volatility spikes, long-term asset class returns are typically higher than the trend that was prevailing prior to that spike event. In other words, periods of volatility, extreme volatility, may provide an opportunity to engage further with core positions. And at the very least, it may be unwise to abandon asset class weighting schemes dictated by longer term considerations. How relevant -- I'm going to turn to the panelists now, how relevant do each of you think this historical template is to the current situation and we'll go around, and Mark, let's kick it off with you.

      >>[DESCRIPTION: Mark Baribeau is talking]

      >>[AUDIO:  Hi, everyone. Yeah, I think it's very relevant. Obviously, there's going to be negative revisions on the earnings front for lots of companies given the economic environment in the second quarter. But it's our view that the leaders going into the correction will also be, for the most part, the leaders coming out. 
      In other words, companies with very strong structural growth behind them, particularly ones where fundamentals are relatively unscathed. I mean, some of the companies that are sold off sharply in the last few weeks have -- or actually having very good fundamental performance like ecommerce leaders around the world. But others that are great companies with well-managed brands have great direct-to-consumer programs either through their own website or their own store base. 
      Maybe slower to come back because foot traffic will take a while to come back. But it's a great buying opportunity to pick up a brand like that on sale, very rarely occurs. So we absolutely view this as a very good buying opportunity for market leaders.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: Great. And let's get a fixed income perspective, Nathan, both on economics and fixed income, any thoughts on the validity of that historical template.

      >>[DESCRIPTION: Nathan Sheets is talking]

      >>[AUDIO:  So my views very much echo Mark's views that I think it is an excellent template and an excellent way of thinking about where the markets are today. And I think those opportunities exist in a relative sense that there are going to be winners and losers as a result of this. And also in an absolute sense in that my expectation is that, say, a year from now, the macro economy and the markets are going to be in a better place. 
      When you think about some of the relative winners and losers, the list that I've put forward, there isn't a whole lot of surprise there. You know, it seems to me that industries that depend on intensive face-to-face contact, and especially contact with a whole range of new and different people, like the airlines, the hotels, movie theaters, and the like, are likely to come out of this in a relatively weaker position. 
      Whereas industries like technology that are able to bring us together virtually and can step in and substitute for that kind of face-to-face contact are likely to be winners going forward. Thinking that in a market sector sense, our sense is that commercial real estate is likely to feel some adverse impact from this. 
      As we sold of coronavirus, we think that the firms are going to rethink the structure of the way they produce and are likely to be comfortable with more of their workers working from home or from dispersed locations. 
      On the other hand, residential real estate might be a winner. That all those people that are working from home may need more office space, they may need larger, larger, larger homes. So there will be distinctly some relative winners and losers. And also, over time, the absolute performance of markets is likely to improve as well.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: And we'll use that as a good segue to turn to Cathy and get her to please give us your thoughts on this as well.

      >>[DESCRIPTION: Cathy Marcus is talking]

      >>[AUDIO:  Sure. You know, in terms of the relevancy of the historical template, I'm not sure how applicable it is actually at this point to our views on real estate in that the sectors where we have had conviction, you know, pre-COVID and kind of just pre-COVID was -- you know, remain the same as where they are now. 
      And that really is focused on multifamily and industrial, logistics really with a distribution bent to it. And that doesn't really change but yet, you know, picking up a bit on what Nathan was saying that the nature of how people may use different property types, the nature of how comfortable people are in certain penal environments versus how they were, that that will potentially have some significant impact on real estate and how we use it, how we shop, how we live, where we want to live, where we work. 
      There's lots of structural changes that could be, you know, be longer lasting here in real estate. And real estate had a tremendous return run recently. And the majority of that, if you really look at particularly some of the newer funds that have launched, it's really fueled by industrial properties. And so maybe that is the same, right? 
      Maybe it's not a big change in terms of what is happening right now. In terms of, you know, sort of more near term versus long term, near term, obviously, there's going to be a significant amount of pain felt on the part of most landlords and some lenders in terms of being paid rent and being paid at service. And that will maybe create a class of winners and losers and there'll be some shakeout in the industry as well. And clearly there'll be some shakeout in terms of some of our tenants, both on the corporate side, on the office side, as well as on the retail side clearly which has already begun. 
      So, in terms of, you know, kind of timing the market of new themes, with new themes that have evolved from this crisis, it's not really a strategy of ours at this point. We remain, you know, strongly committed to some of the strategies that we had before. And mostly because those are based on demographic and structural and actually behavioral changes that we're seeing that while they -- maybe certain things will be accelerated or decelerated or they'll shift a little bit in a holistic sense, we don't really see a huge change once the dust settles from this crisis.

      >>[DESCRIPTION: Noah Weisberger is talking] 

      >>[AUDIO: I mean, one of the things that I think about as we go from the historical template to what maybe the new normal as we go from the short-term considerations, what dislocations have emerged and maybe more tactical opportunities and the longer term opportunities that that emerge is clearly the policy response which in some ways is similar to, in other ways, different from what we've seen in the past. 
      So, you know, obviously, we've seen that massive monetary and fiscal policy response in the US globally. It's dynamic, it changes all the time. And so before we turn to the market implications, Nathan, let me get your take on the economic implications and I'll sort of frame with a couple of related questions. And then, obviously, you know, fill in the blanks and give us your thoughts. But, are policymakers doing enough to stabilize the economy in the near term and put it back on track in the medium to long term, and those might be in some ways competing realities? Can a full-blown credit crisis, corporate or consumer be averted? And critically, you know, day by day, what else might we see from policymakers?

      >>[DESCRIPTION: Nathan Sheets is talking]

      >>[AUDIO: Well, no, we are, as you say, seeing a truly extraordinary policy response from the Federal Reserve and other central banks around the globe. And also importantly on the fiscal side that I think that over the past three weeks, we've seen probably more policy stimulus put in place than we saw during the totality of the global financial crisis. 
      The very fact that the Federal Reserve will be providing direct support to the municipal bond market and the corporate bond market is just simply unprecedented and extraordinary. Now, the question you raised as to whether it will be enough is clearly the key one. And I think it is a question where there is much uncertainty. So on the one hand, it is a powerful policy response, but on the other, we are dealing with an economic shock here that is unimaginably large and powerful. 
      The spot that we would systematically seek to close down our economies in the United States and globally for a sustained period of time is something that we've never seen before. And there is a lot of uncertainty about the damage that's being done as we speak and then how long it's going to take for the economy to recover. 
      So on the one hand, a very powerful policy response, on the other hand is come against the backdrop of very, very severe economic conditions. And just giving you a bottom line in terms of some numbers, I think our expectation is that second quarter US GDP growth that have seasonally adjusted annual rate is likely to be somewhere around minus 25% or minus 30%. The most severe contraction that we had seen in the post-war period previously was minus 10. 
      The global economy will also see unprecedented declines during the second quarter. And then the big question is, how quickly does the virus abate? And how quickly can we start getting back to work and getting back to more kind of normal spending patterns? And I think that that will determine if the virus ends up being more prolonged, then we're going to need more policy stimulus and the hit is going to be larger. But I think the big question as to whether the policy response is sufficient depends on how the virus evolves from here.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: And do you see more dry powder on the fiscal side or on the monetary policy side from here, if needed?

      >>[DESCRIPTION: Nathan Sheets is talking]

      >>[AUDIO:  Monetary policy has shown us that they can always do more. And I think that many analysts were concerned going into this, then maybe the central banks would say, we don't have a lot of degrees of freedom. But what they have put together is truly extraordinary. Now we are in a place where many tools have been deployed. 
      But I think central banks can always do more. Similarly, on the fiscal side, the ability to borrow through this, I think, will be quite substantial and significant. So I don't think that the governments are constrained as to what they can do in the short term. But I have to say that as indebtedness mounts, particularly in emerging market economies, that leaves me concerned about what the next chapter might look like. So I think as a practical matter at this point, we're going to need -- if it's more severe, we're going to need more monetary, add more fiscal stimulus. But I am a little more worried -- I'm worried about the hangovers on both, particularly on the fiscal side.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: We'll definitely return to the hangover question. But, Cathy, as we listen to some of those numbers and, you know, down 20% in GDP in a quarter. Again, that's an annualized number. But, is there enough in the CARES Act that you see that will help out in your space in, you know, keeping small businesses, medium-sized businesses, consumers, able to meet their debt obligations in the short term and solve it in the long term, and how do you see the support from -- particularly in the fiscal side helping out sort of payment flows in the real estate space?

      >>[DESCRIPTION: Cathy Marcus is talking]

      >>[AUDIO: I think there's many different answers to that. And it depends on, you know, who you're asking whether or not it's enough help for them, right? 
      There's various constituencies. So, when I think about philosophically what I think the CARES Act is trying to do is it's trying to keep small businesses in business, right? And I think everyone, you know, in real estate, we know that, you know, that's a good thing, right? 
      That, you know, not every lease can be Microsoft and Amazon and in fact, in particular, in our retail projects, you know, the majority of the space is taken up by, you know, groupings of small businesses. 
      So, we are clearly aligned, you know, with the government in that way as landlords that we definitely want to keep small businesses alive. The problem is, I think, right now, there are constraints on the execution. And, you know, a lot of small business owners in the US are not that sophisticated, and especially in sort of the gig economy or the younger generation, they don't always have banking relationships, right? 
      They might be crowdfunding or they might be doing their banking more online. And my understanding is that actually being able to access some of these loans, particularly the SBA loans, you know, having a solid banking relationship, getting yourself into, you know, having someone help you process all this information and all the requirements, that can be challenging. 
      So there's definitely a broad swath of small businesses that this will not be an easy thing for them to do. But shifting from the actual small businesses to the real estate business as landlords both in -- actually in the commercial sectors and the residential sectors, the one person who really doesn't seem to be having a lot of -- getting a lot of sympathy is the landlord. And, you know, we are -- the government seems to be very focused on enabling small businesses to meet payroll.
      But a lot of these loans only allow for 25% buffer above payroll, which that's not going to pay a rent, right? And if you happen to own your building, that's not going to pay your mortgage. And so, it seems that around the world, this is not just the US thing, that, you know, different governments both, you know, local and larger country in Europe in particular, where essentially landlords are being told, you know, you can't evict your tenants, you have to help them to defer their payments. You know, ultimately, the majority of the remedies that a landlord has have been taken away. And so that clearly makes a lot of sense for tenants and borrowers who were under strain. 
      But unfortunately, there are always opportunists in this type of environment where there are, you know, just as an example, big grocery chains are clearly doing extremely well right now, who are asking for rent relief, right? You have borrowers who have, you know, what will -- what we call three times coverage, right? 
      They have income, you know, three times the amount that they need to pay in their debt service and they're asking for relief. So there are definitely -- there is potential for some abuse out there. So I guess that's a long way of saying, I think that philosophically and intent-wise, the CARES Act is very much, you know, aligned with the objectives of the [inaudible] real estate sector. However, I think in the execution, there are going to be some challenges. And also at some point, there has to be some consideration given to the plight of the landlord who have to pay property taxes and have to pay utility bills and have employees of their own that they have to take care of. So it -- right now, I guess to me, it feels slightly imbalanced.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: Very interesting perspective. More generally, Mark, from an equity market perspective, you know, there's a lot of talk in terms of liquidity support in the debt space and what that means in the real estate space, but the ability for corporates to generate cash. How did that premium for balance sheet play out? Does it persist the backstop? Do liquidity facilities make that less relevant? How do you see those things playing out in the near to long term?

      >>[DESCRIPTION: Mark Baribeau is talking]

      >>[AUDIO:  Well, I think it's like any typical recession, I don't think it's any different. Obviously, there are some extraordinary measures in place against some extraordinary declines in demand in certain packets of the economy. 
      So it's not -- no cycle is ever the same. But it's always true that companies with healthier balance sheets, companies that generate lots of free cash flow are in better position and will be better positioned coming out. That's just the nature of the game. So I don't -- I wouldn't say it's -- I wouldn't say the roadmap is any different than any other recession/recovery other than the characters change, the winners and losers change by industry depending on who's impacted by what, on a demand front.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: So speaking of some of the winning industries, tech outperformance relative to market, you can't even -- you know, you don't see any real wavering there. It's a sector that -- Or, you know, most of my time in markets, it was always thought of as being decidedly cyclical, and here it is leading during this period of turmoil. What do you make of that ongoing outperformance and would you deploy new money, long-term money into the sector, even after it's outperformed during this last period?

      >>[DESCRIPTION: Mark Baribeau is talking]*

      >>[AUDIO: Yes, I would absolutely deploy more money in the sector. Tech is acting on a countercyclical basis this time. As we know, every cycle is different. 
      But, the simple reason is the -- it's the infrastructure of the mobile internet. So if you think about what we're all doing day to day and this work from home, live from home environment, you have certain sectors that require certain technological support that are actually thriving like ecommerce. 
      Unemployment is surging, and yet big leaders like Amazon are hiring tens of thousands of employees in this environment to keep up with surging demand. Cloud computing and communication-based cloud services are also doing quite well, we believe, because they're easy to deploy and, again, people are needing to get up and running quickly with alternative ways of communication and with their -- both their companies and their clients. 
      Then you finally have devices and security. You know, we know of many financial institutions that have deployed tens of thousands of laptops to their employees to work from home. Those all need to be secure as well. 
      So we have endpoint security services also doing quite well. Digital payments, of course, are -- there'll be winners and losers within different industry segments, but obviously, this is just another confirmation that, you know, we're eliminating certain payment systems from our behavior and going to digital formats. And then finally, the best part for all of us is streaming video entertainment. 
      These trends were well underway, of course, before but it's absolutely in the nail in the coffin for traditional media. So, we're seeing effectively, you know, a combination of many different factors that were doing well prior to COVID-19. And if anything, this crisis is accelerating the digital transformation of the enterprise. 
      And we think as companies kind of get back on their feet later this year into 2021, you can be sure that the priority number one for most companies from like capex perspective, from a technology stack perspective, is to make sure that their enterprise can run more efficiently on the cloud with more applications, so that you can move to a more seamless environment, depending on how that environment changes. So, that's why we think tech is leading and will continue to lead the recovery.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: That last observation is particularly interesting where this is the -- looking through the crisis as an interest about catching up on lost demand through this period, but there's actually an impulse that's created and sort of flexibly pulls -- could pull the economy higher. That's pretty interesting observation.
      Nathan, let me just turn back to you for one final comment. And this is more of a markets question rather than purely economics. The gap between high yield and IG, how is that likely to evolve? And if I would ask the question more pointedly, I would say, is policy just supporting the good borrowers already? 
      And are policy measures just serving to prop up that advantage which already exist and which seems to be playing itself out in multiple asset classes? Or is there something new here for impaired credits that may help going forward?

      >>[DESCRIPTION: Nathan Sheets is talking]

      >>[AUDIO: Last week, the Federal Reserve significantly expanded its credit facilities and that included buying more aggressively in the investment grade bond market. But notably, and maybe the biggest news of the announcement, was that the Fed indicated that it was willing to buy a so-called fallen angels, firms that were originally rated investment grade but moved into the high-yield space. And it would also buy some high-yield ETFs. And on this news, we saw the high-yield market rally significantly in response. 
      So I think the bottom line here is that the Federal Reserve is underscoring that its objective through this episode is to provide the support necessary for the markets to function and their definition of which markets are their responsibility is extremely broad. 
      So we are seeing that safety net expanded. And I think that the Fed's efforts are narrowing the spreads between the less risky and more risky borrowers. And should some kind of a shock arise that hit some other part of the markets more generally, I think that the Fed has shown that it's willing to respond. 
      So I think the Fed is working with all its tools to try to guide the markets to a more normal kind of functioning. But it also feels to me like implicitly, they're even saying they want more normal pricing.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: Do you think they get to equities? And this is a lead into a question to Mark about corporate buybacks and a buyer of last resort. But Nathan, just -- do you think that's on the radar screen in a reasonable way? Or is that really a very, very dire scenario that they'll be hard to imagine?

      >>[DESCRIPTION: Nathan Sheets is talking]

      >>[AUDIO:  It's being debated. As a former Fed staffer, my instinct is that that is a bridge too far. 
      But I felt that way about high yield, that was something that was so unusual that they wouldn't get there. And they did. So I think that if the impact of the virus is sustained, and the economy is reeling, and it feels that there are meaningful disruptions in any financial market, possibly including the equity market that that will seriously consider whether it can expand its tools with treasury backstops, which is very important, with treasury backstops to address those disruptions. 
      So if things became sufficiently severe, I think that everything could be on the table.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: So Mark, short of that dire scenario, let's see over the last -- maybe it's almost a decade at this point, people have been conditioned to think that there is a kind of a baseline beat of steady buying on the corporate side. Does the market need that corporate bid? And what sort of the politics of, you know, buybacks and can the market sustain a rally without that corporate bid if it's politically unfeasible?

      >>[DESCRIPTION: Mark Baribeau is talking]

      >>[AUDIO: Well, the market has already retraced half its losses. So, I would think the answer is evident that now you don't need buybacks necessarily to drive the market. 
      There are, you know, companies that, again, with healthy balance sheets generating lots of free cash flow, they were at a peak economic environment with full employment and investment opportunities were relatively limited. So, buybacks were popular instead of capex. And for most companies, I don't think that changes over the next year. 
      So, as things normalize a little bit, companies that are holding those big cash awards will either do some limited M&A or they will engage in buybacks as they normally would. In addition, I would note that many companies around the world have chosen to suspend temporarily their dividend payments, again, not because they're in trouble, like in a typical recession you would see that, it's just being prudent and preserving cash. And they have not been punished by the market for doing so. Again, I think it's because they weren't healthy shape going in. 
      So you're seeing companies take fairly creative approaches to maintaining healthy levels of liquidity and cash and I don't see that stopping but -- and other than a company that's been bailed up by the US government, other companies will absolutely use buybacks where appropriate.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: Great. One final question to throw around the horn and try to be mindful of everyone's time and keep this to a tight time schedule. We're getting used to life -- or we're trying to get used to life with social distancing, new patterns of behavior are likely to emerge, some old patterns of behavior are likely to reassert themselves. 
      What do you -- each one of you see as critical new normals or reversion to old normals emerging for long-term investors? And Nathan, let me turn it first to you. And I think you alluded to it before. I'll be most curious about your thoughts of a new fiscal regime and how we might be pricing inflation risk on the back of all of this stimulus that we're getting and then we'll go around the horn after that.

      >>[DESCRIPTION: Nathan Sheets is talking]

      >>[AUDIO: Well, as this shock hit, we were looking at a global economy that was dealing with growth that was not slower than we had previously seen. And we were also in an environment of rapidly aging demographics. 
      Our sense is that the upshot of all of that was a low-rate environment, which had prevailed for quite some time. And my thinking is that this coronavirus shock is likely to reinforce many of those trends. 
      I think we're likely to see increased indebtedness, certainly in the public sector, and likely in some parts of the private sector as well. And central banks largely at or near the zero lower bound. And looking at the experience of the European Central Bank and the Bank of Japan, the zero lower bound is proven to be something of a Hotel California, where you check in and it's really, really difficult to check out. The Fed thought they had launched. But in the event, they've been dragged back. 
      So I think these kinds of themes of slower growth aging populations, higher indebtedness, and low rates that we've been talking about are likely to be even more true. And then specifically on inflation, there are some scenarios where there could be some bottlenecks in the system or indebtedness might raise concern about the value of currencies. 
      Chairman Powell has been quite dismissive of the inflation risk. He certainly doesn't see that as the central scenario. And I'm inclined to agree with him. As I think about the range of challenges we're likely to face going forward, I think it's likely to continue to be more of a disinflationary environment than an inflationary environment.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO: Interesting. Cathy, same question to you. I think you were speaking a little bit before in terms -- specifically in terms of sector views. What you see as the normal emerging from this crisis look like and maybe we could get you to expand a little bit on that from your perspective.

      >>[DESCRIPTION: Cathy Marcus is talking]

      >>[AUDIO:  In terms of different sectors, I think it's very easy to imagine a world right now where the new normal is quite different by property type, right, where you could -- if you think about office space, there has been a trend toward densification of office space, open floor plans, you know, communal officing, if you will, you know, flexible workspace, right? 
      You can -- You could start to imagine where people might really like to have an office door to close now, right? And if you think about residential multifamily rentals, in particular, the trends have really been toward much smaller units where people live but much larger and more opulent amenity spaces, right, that people are spending their kind of non-sleeping time more and more of that in the public areas of their apartment project. And you could clearly see that that might change. 
      Retail -- The only real successful retail recently has in what we call experiential retail, which is all about going to the movies, going out to dinner, walking around among large groups of people, having, you know, sort of this town-center type experience. 
      You could see how people might be more nervous doing that. So you can -- And hotels, right? I mean, hotels are just a whole other category in terms of how things might change. And yet if you maybe put some distance between the crisis and, you know, where we may end up, it's been, I think, 17 years since the SARS outbreak in Hong Kong. And since then, population density has increased rather than decreased. And office density has also increased. 
      So you might not have expected that, you know, in the midst of the SARS outbreak. You know, people in Hong Kong are living and working, at least up until this recent incident, living and working closer than they did before the SARS outbreak. 
      For those of us who, you know, live and work in the New York metropolitan area, many of us remember the period after September 11th, where everyone was feeling like the companies are going to be too afraid to have a headquarters or major headquarters presence in Manhattan. 
      If they did, it would clearly be an Upper Park Avenue. It would be very far from the financial district. And the reality is that the -- you know, the CBD, the core of, you know, office users in Manhattan has actually moved south and not north, right, you know, in -- since that time. 
      And residential prices until recently continued to go up because families were continuing and individuals were continuing to want to live in Manhattan. So I guess my point is you never really know what the longer term effects are going to be. But it's clear that, you know, there could be some more structural changes to our business.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO:  Great. Great. Thank you very much. And, Mark, finally, let's turn to you on the same topic, your sector outlook currently being informed by the possibility of a new normal. It sounds like some of the trends you're identifying are actually intact and just curious to get your views.

      >>[DESCRIPTION: Mark Baribeau is talking]

      >>[AUDIO: Yeah, I mean, obviously, you know, just to be consistent with what I said earlier, you're looking at bigger and better applications of technology playing a role in keeping us all connected, giving us access to information or goods very quickly. So, we don't see any of those trends changing. In fact, they're likely to accelerate. 
      There are some new things that have come along now that people might find useful, like telemedicine. There were skeptics about that. And I think the more people using it, especially the more doctors are using it today, the more they're liking it. You can see more patients, it can be more effective. Think of all the time spent from people having to go to the doctor's office when they can do it remotely, it might actually be a better solution. 
      When we look at distribution of companies, your -- Oh, I think one of the aftermaths of this event is going to be an absolute acceleration of their desire to move direct to consumer and just -- in terms of distribution, and that's either having their own store footprint and not relying on other retailers, wholesaler, you know, and getting rid of the wholesale model as much as possible. And, of course, going direct to consumer via their own website. 
      And I think they're absolutely going to accelerate those trends because it only makes sense to control your brand more directly. And then lastly, in terms of what does change, I mean, I think I speak for everyone when I say we can't -- we all can't wait to get out of our house, go out to dinner, go to a bar with friends, and socialize. So, humans will be back to normal as quickly as they're allowed to be from that perspective.

      >>[DESCRIPTION: Noah Weisberger is talking]

      >>[AUDIO:  Great. Well, that was, in my mind, a really wide-ranging conversation with lots of interesting commonalities and opinions across the asset classes. Nathan, Mark, Cathy, thank you so much for your time and for your thoughts. 
      If I try to put a bit of a wrap around some of these thoughts, I think certainly, you know, on the policy side, it sounds like we've done a lot but there is more in the quiver should it be needed both on the fiscal and the monetary policy side. 
      What's interesting to me is that that backstop then leads to some compression in the credit space, a continuation of typical and equity space, desire for strong balance sheets. But beyond that, it does seem like there are some preexisting trends that even as we go through this big disruptive phase, even if it get reinforced, as Mark was talking about on the tech side. And I think the fact that there might be an acceleration in capex for tech goods, I think, is a really interesting thesis to keep track of as we go through and come out of it. 
      Its actually additional fuel being created rather than just a return to normal. And some of the real estate games, again, multifamily industrial logistics, that were preexisting themes that survive through this period and emerge on the other side. And it sounds like as we talk around the group, there are some new themes that might emerge that Mark was just mentioning, but the retail space disruptions and maybe even in some of the residential side on the real estate space are things to watch that we may see a less robust bounce back. 
      Very interesting food for thought and I think a lot of a good nuggets there for our clients, our institutional long-term thinkers. So again, thank you very much for those who clicked and dialed into this webinar. Thank you to the panelists. 
      As a final reminder, this was not live but you can email questions to our panel. And again, that email address is thought.leadership@pgim.com. And let me just conclude by saying on behalf of Nathan, Mark, Cath and myself, thank you for tuning in. We look forward to continuing the conversation and goodbye for now.

      [ Music ]

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