Global CIO Video: "We expect the recovery to continue."
So far this year, financial markets have been swayed by a most unexpected turn of events, the COVID-19 pandemic and its repercussions. Yet, in the final quarter of this year, attention has shifted to a highly anticipated event, the US elections.
Given the importance of this year's outcome, investors are well advised to prepare for bouts of volatility in the weeks ahead. Indeed, the US elections featured prominently in our latest Investment Committee discussion, as we reassessed our views in light of the events ahead. We continue to believe that equities should perform well over a medium-term horizon, but consider it prudent not to raise equity allocations above strategic levels for now.
Overall, we retain a cyclical tilt in portfolios by overweighting credits and the broad commodity complex. Government bonds remain at underweight, adding another cyclical element to our positioning. As far as currencies are concerned, we continue to expect the USD to resume its weakening trend given its diminished interest rate advantage and rising US twin deficits.
Along with the US election, we are also keeping an eye on the deadlock over further fiscal stimulus in the USA, the ongoing Brexit talks and the course of the pandemic. In terms of the global economy, growth numbers are going back toward their longer-term mean after some extraordinarily high growth rates in the summer as economies reopened. So although the rate of growth in industrial production is likely peaking, we expect the recovery to continue.