Equity strategy and market outlook – October 2020

In this month’s strategy piece, Alastair notes that a second wave of lockdowns have arrived in Europe. However, the measures are not as severe as earlier in the year even if they will undoubtedly have a depressing effect on Q4 GDP. ‘Hands, face, space’ has proved inadequate protection against a second wave and the necessity of circuit-breaker lockdowns represents a meaningful bump in the road to recovery. However, they are likely to have only a relatively modest impact on the GDP outlook for 2021, provided an effective vaccine becomes available early next year. The risks for markets in respect of the US presidential election appear to centre on the possibility of a contested result which we believe would be poorly received by markets. Over the medium term, a Biden administration would be likely to result in a less confrontational approach to foreign policy but also higher domestic US corporate taxes. This could mark the high tide in the very large underperformance of European equities versus the US. Download PDF