This crisis has not even started. It will take an extremely long time to reach its peak velocity, and by a long time I mean at least 15-20 years,” Baz, who co-manages GLG’s Atlas Macro fund, told delegates on Tuesday.

“The economic impact of this crisis will be devastating,” he added. “Risky assets will look very ugly as a result.”

He estimates that the implied equity risk premium – the extra return the stock market must provide over the return on government bonds to compensate for market risk – was likely to be less than 3 percent, below current consensus.

“This means, believe it or not, that equities are still expensive (relative) to bonds.”

However, he said that corporate debt was being priced far more cheaply in bond markets than in equity markets.

“This is as close as you can come to macro arbitrage,” he said. “Corporate debt is by far cheaper than equities.”

Source: Reuters