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Investment Monthly - September 2020

We think pricing in many markets is consistent with our baseline expectation of a swoosh style economic recovery.
01 September 2020
    Download the full reportPDF, 4.86MB

    Key takeaways:

    • We think pricing in many markets is consistent with our baseline expectation of a “swoosh” style economic recovery with some tentative signs of the more optimistic rapid recovery scenario being discounted. Overall, we do not have a big quarrel with market pricing at this point
    • There are upside risks to markets, linked to better news and price momentum. Meanwhile, downside risks include the re-emergence of the virus, policy error, or long-term damage to economies. We view these risks as roughly balanced which means markets could be range-bound in the coming months
    • Risk-taking can be rewarded by the market, but after the fastest rally on record, the hurdle for positive surprise is higher than it was, and prospective returns have fallen considerably
    • A handful of asset classes – Asia high-yield, local-currency emerging market debt, fallen angels and selected equities – still offer relatively-high expected returns. For us, now is also the time to think hard about diversifying portfolios out of core government bonds into a wider set of alternative asset classes