In this month’s strategy piece, Alastair believes that investors should reflect on the multidimensional nature of the recovery from COVID-19. With the easing of lockdowns, global GDP is rebounding, but is also moving towards a rather different equilibrium compared to consensus forecasts at the start of 2020. Monetary and fiscal policy is on a completely different long-term setting. Furthermore, there is evidence of accelerated obsolescence in working practices and lifestyles. The COVID-19 pandemic also appears to be evolving into a different state, requiring a less aggressive public health response. Vaccine trials are progressing and may be reporting data by year-end. This is good news and lends weight to the idea that safe-haven assets such as gold and government bonds, in addition to the new class of ‘digital defensives’, may have seen their short-term high watermark.
2020 consensus earnings forecasts have stabilised in Europe and are rising in the US. We maintain a neutral view on global equities given the extent of the recovery of market valuations since the lows of March but are increasingly optimistic that further national lockdowns can be avoided. As a result, we believe it may be time to shift allocations away from the US and towards traditionally higher beta and more cyclical markets such as Europe and emerging markets.Download PDF