Economic Hardship vs. Policy Deluge
Defying the deepest global post-war recession, risk assets have continued to climb the wall of worries.
- Defying the deepest global post-war recession, risk assets have continued to climb the wall of worries.
- Flattening new cases in the advanced economies and the continued policy deluge will help to keep sentiment underpinned.
- The air is getting thin, though, with US equity markets back to autumn 2019 levels. Key risks are a second wave of infections and the fast deterioration in US/China relations.
- We stick to a pro-risk tilt concentrated in the higher quality buckets of risk assets, even as cyclical assets are showing signs of life. Keep a small long duration bias given the ‘swoosh’ recovery, disinflation and continued central bank activism.
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Market Perspectives 06/2020
EQUITIES: POSITIVE RETURNS AHEAD DESPITE CHALLENGES
Equity markets have rebounded from a historical slump in Q1, with US markets even posting fresh record highs. We acknowledge the risen risks of setbacks amid loftier valuations, elevated political risks (US elections, Brexit and US-China frictions) and Covid uncertainties into autumn.
COVID-19 FACTS & FIGURES
The OECD said in a report that the world’s GDP is projected to decline by 4.5%, less the 6% estimated in June. Asian Development Bank is projecting a 0.7% contraction in the economies of Asia, representing the first drop since the early 1960s.
TAKING MONETARY POLICY TO YET ANOTHER LEVEL
The presentation of the new Long Term goal and strategy on August 27 marks a deep shift in the Fed’s monetary policy. The new way inflation and the labour market will affect monetary policy will result in a marked downward bias to interest rates.