EQUITIES: POSITIVE RETURNS AHEAD DESPITE CHALLENGES

Equity markets have rebounded from a historical slump in Q1, with US markets even posting fresh record highs.

Highlights:

  • 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.
  • Overall, however, we see some further moderate upside. Higher valuations are compensated by recovering economic growth and corporate earnings amid strongly expanding monetary and fiscal policies.
  • Central banks’ commitments to persistently low yields and continued asset purchases justify structurally higher market multiples. Investors’ positioning is still not stretched.
  • We maintain a slight tilt towards cyclicals and EMs, which have been lagging the rally.

Download the full publication below

FOCAL POINT: EQUITIES -POSITIVE RETURNS AHEAD DESPITE CHALLENGES

RELATED INSIGHTS

CHINA’S Q4 GDP GROWTH SURPRISED ON THE UPSIDE, BUT RISKS TO THE OUTLOOK HAVE INCREASED
This morning, China published its Q4 GDP growth alongside with December monthly activity data. Q4 growth accelerated to 6.5% yoy which lifted total 2020 GDP to 2.3%. December real activity data were more mixed. While exports came in strongly, important domestic demand components were a bit unsteady.
COVID-19 FACTS & FIGURES
US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.
Video Outlook 2021: Repair and Despair
Watch the Outlook video with Vincent Chaigneau, Head of Research at Generali Investments