Markets See Light at the End of the Tunnel: Recovery by July, Says CPLIX’s Grant

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In a turbulent period for the markets, Calamos has been hosting a Calamos CIO Conference Call series for investment professionals. Below are notes from a call Thursday, April 30, with Michael Grant, Co-CIO, Sr. Co-Portfolio Manager, Head of Long/Short Strategies. To listen to the call in its entirety, go to

For highlights on last month's calls, see this post.

While predicting that “economic activity in March and April will be the worst of our professional careers,” Grant nonetheless says markets see light at the end of the tunnel that includes economic recovery by July.

“Financial markets are communicating a consistent message: namely, the contours of imminent economic recovery are tracking better than what anyone’s sensibilities would suggest,” he said.

A Sustainable Equity Recovery, the Result of Extraordinary Action

Grant acknowledged that many investors are confused by an apparent paradox: the rapid and uninterrupted recovery in equities since the March lows despite the most severe global recession on record. The rally is “special,” he agreed, and the result of decisive initiatives of the Federal Reserve.

“The reality is that U.S. policymakers have quashed the liquidity and solvency risks of this event. History is likely to judge them well,” said Grant.

“The resilience of the Western consumer combined with unparalleled policy support,” he continued, “will minimize financial stress with the consequence that by mid-year, the global output cycle is well on its way to regaining its pre-virus capacity.”

Further, Grant believes that April’s equity recovery is sustainable, which could disappoint those waiting for a retest. “There is a material likelihood that clients who sold at [March] lows will never see these entry points again,” he said.

It was in March when the fund moved to a net long exposure fluctuating between 50% and 60%, which has been maintained. According to Grant, the team believed that the COVID-19 spread, incidence and fatality would “inflect positively” while understanding that the economic and corporate data would be “ugly.” They were weighing whether to add further hedges on the assumption of a retest of the March lows until the Fed’s “game-changing” actions on April 9.

“Chairman Powell noted that the economic calamity was not the result of ‘bad actors.’ He thus had no misgivings relating to moral hazard and added, ‘We will make you whole’…I want to emphasize how extraordinary these policy actions are,” said Grant.