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Global Investment Views Asset Allocation Macroeconomy Markets
29.07.2020

Global Investment Views - August 2020

Published 

29 July, 2020

> 10 minutes
29.07.2020
Global Investment Views - August 2020
Published 

29 July, 2020

> 10 minutes

THE ESSENTIAL

A summer of fear and greed

As we enter the summer, conflicting forces in major equity markets have led to a period of temporary equilibrium between fear(risk of second wave, low bond yields, high gold prices) and greed (equities rallying as a result of economies reopening). The big question for investors now is: where do we go from here? In our view, the upside scenario that has been priced in by markets is challenged by the still uncertain path of the virus. Some early market enthusiasm about a virus cure could be overdone, as the path towards a widely available, effective vaccine could be long. Additional stimulus will be needed to offset the demand loss and reduce vulnerabilities in some sectors. The approval of a €750bn recovery fund in Europe, and for additional fiscal stimulus in the US and China, may sustain market sentiment in the short term. However, we do not see a case for an aggressive risk increase in portfolios, but rather for some tactical adjustments based on relative valuations. In equities, the Q2 earnings season will be a key test. Data will be ugly this quarter, but with this already factored in, attention will turn to forward guidance. Consensus estimates are very positive for next year, but corporates remain reluctant to provide guidance as the virus is not yet under control.


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