EQUITIES: POSITIVE RETURNS AHEAD DESPITE CHALLENGES
Equity markets have rebounded from a historical slump in Q1, with US markets even posting fresh record highs.
- 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
COVID-19 FACTS & FIGURES
According to the IMF’s Managing Director, strong international cooperation on coronavirus vaccine could speed up the world economic recovery and add $9 trillion to global income by 2025. A WHO trial found that Remdesivir, Hydroxychloroquine, Lopinavir and Interferon have little or no effect on hospitalized Covid-19 patients. Gilead Sciences has questioned the findings of the WHO study saying data appeared inconsistent.
INCORPORATING QUANT SIGNALS INTO EU EQUITY SECTOR/STYLE STRATEGY: MAINTAIN A TILT TO CYCLICALS AND VALUE
We present an update of our proprietary equity valuation tool, based on quant models. It provides indications of over- or undervaluation for different sectors and styles of European equities, which is further enriched by our qualitative analysis. Currently, among European equity sectors, financials, energy, telecoms, and autos look undervalued while Pharma, utilities and software appear overvalued.
CHINA’S RECOVERY CONTINUED BUT A BIT SOFTER THAN EXPECTED
China's economic recovery continued in Q3 2020, although a bit softer than expected. Real GDP growth rose to 4.9% yoy, slightly below the Reuters consensus expectation of 5.2% yoy, but still a substantial upturn from the 3.2% yoy in Q2. On a quarterly base, growth dynamics softened to 2.7% qoq, after 11.7% qoq and -10% qoq in the two previous quarters.