Global CIO Michael Strobaek: "Markets have looked through all this."
This year has not been shy of market-moving events, and recent weeks continued to deliver.
On the back of the US election and encouraging vaccine news, equity markets rallied. President-elect Joe Biden is likely to face a divided Congress, but investors welcomed the result, as it should prevent marked increases in corporate taxes.
Meanwhile, the COVID-19 pandemic continues to plague Europe and the USA, with renewed restrictions likely to hamper growth in Q4. The US Federal Reserve and other central banks are well aware that this is the main tail risk for economies, and we thus expect that their policies will remain supportive. In contrast, emerging markets (EM) and Asia in particular are in much better shape: growth is robust, earnings are improving and a weaker USD should be supportive going forward.
We discussed these factors in our latest Investment Committee meeting and decided to raise equities to an overweight allocation in portfolios, which we implement through an overweight in EM equities, and Asian equities in particular.
Developed market equities remain at strategic levels, though our overweight in German equities was arguably the biggest beneficiary of Pfizer's recent COVID-19 vaccine announcement. We continue to favor credit markets as well as commodities. Moreover, we maintain our view that the USD should depreciate further, both against developed and EM currencies.