The Big Picture - Cash, credit and real estate
After a short, sharp recession (and more rapid rebound than we expected), the question is whether we are now at the start of a new global cycle? We believe so but expect it to be hesitant as rolling lockdowns are enforced and policy support is removed. At this stage of a new cycle we prefer cyclical assets and favour credit and real estate within our Model Asset Allocation. Among defensive assets we prefer cash. Regionally, we are focused on emerging market (EM), Japanese and UK assets.
There remain many uncertainties about the future path of the global economy, not least of which will be the path of Covid-19 infections and deaths as the Northern Hemisphere winter approaches (many countries that have relaxed lockdowns are now having to reintroduce restrictions as infections rise). We are assuming a vaccine will go into mass production within our 12-month forecast horizon but doubt that we will see a return to normal behaviour within that timeframe (if nothing else, we believe that working and shopping habits have changed for good). Policy makers have been generous during 2020 and we suspect policy support will diminish within our forecast horizon. There is a risk that further collateral damage (bankruptcies and unemployment) will reveal itself as government support programmes end (we assume a growth path somewhere between a traditional recovery and that seen after the Global Financial Crisis (GFC)). Finally, let’s not forget the US presidential election on 3 November 2020, where we expect a change at the White House.
Investment risks
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The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Important information
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Data as at 30.09.2020, unless otherwise stated. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information in this document has been prepared without taking into account any investor’s investment objectives, financial situation or particular needs. Before acting on the information the investor should consider its appropriateness having regard to their investment objectives, financial situation and needs.
