January 1, 2020

(Vir)alteration of investor optimism

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In Short

Just as the trade truce provided broad-based relief, the Coronavirus is unsettling global markets.
(Vir)alteration of investor optimism
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Highlights:

  • Just as the trade truce provided broad-based relief, the Coronavirus is unsettling global markets.
  • The fast-spreading disease is challenging the tender global macro green shoots, but we still see resilience in US and EA domestic demand.
  • Experience from past episodes suggests that markets tend to overshoot, but rebound sharply once the number of new infections starts to slow.
  • Even before the Coronavirus, we had embraced a slightly more cautious stance on early signs of investor complacency. We maintain a (smaller) prorisk tilt in the portfolios, but reduce overweights in Equities and HY Credit. We keep our overweight in IG corporates and underweight in core bonds.

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(VIR)ALTERATION OF
INVESTOR OPTIMISM

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