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Investment expertise

Monthly Investment Outlook

Monthly Investment Outlook

We publish a Monthly Investment Outlook that highlights our convictions on equities and bonds, as well as recent asset allocation changes.



Summary

  • MONTHLY INVESTMENT OUTLOOK - Central banks hand the baton to fiscal authorities for the next leg of recovery
  • GLOBAL TACTICAL ASSET ALLOCATION - Staying pro-risk while protecting against near-term vulnerabilities
  • UBP ECONOMIC OUTLOOK - Weak start to Q1 in developed countries
  • UBP ECONOMIC OUTLOOK - US budgetary packages to face political and financing issues
  • GLOBAL BONDS - Building a barbell in fixed income portfolios
  • GLOBAL EQUITIES - Building barbells in equities as well
  • RECENT VIEW CHANGES - Restoring risk-reward asymmetry to portfolios

  • 2021 began with renewed bouts of volatility with a tug of war emerging between concerns over slow vaccine rollouts especially on the continent and delays in US fiscal support against positive earnings trends.
  • Indeed, continental Europe has lagged the UK and even the United States in the rollout of vaccines. Though the holiday surge in cases appears to be abating, concerns about the spread of new variants looks set to extend mobility restrictions through 1Q21. In spite of this, developments in Israel and the UAE provide hope regarding vaccine effectiveness once deployed.
  • Delays in the delivery of additional US relief measures is likewise creating uncertainty across the Atlantic. Though we believe this is a question of when rather than if, the risk of a surge in new variants in the months ahead combined with a delay in the timing of fiscal support has reintroduced volatility into markets in late-January.
  • Indeed, with financial conditions having pivoted away from the Fed’s and ECB’s preferred loose conditions, the global economy will need to rely on fiscal authorities to drive the next leg of recovery looking ahead.
  • With 82% of reporting companies beating expectations in January, companies exceeding revenue and earnings estimates are lagging the market post-results. While disappointing, this is helping to ease valuation pressures in the market.
  • With economic growth and earnings likely to serve as a tailwind for markets in 2021, we continue to prefer a ‘barbell’ approach within and across multi-asset portfolios.
  • As recovery should drive equities around the world, we retain our ‘barbell’ between quality global transformation and cyclical recovery themes within our equity allocations seeking opportunities to add to cyclical recovery themes should they present themselves.
  • Historically tight credit spreads warrant caution. As a result, with a short-duration bias, we have similarly used the spike in US Treasury yields in January to create a ‘barbell’ within our fixed income allocations as well.
  • Recognising the near-term uncertainty over virus/vaccine trajectories, we likewise used the cheap cost of protection in mid-January to recreate the ‘barbell’ overlay strategy of January 2020 that allowed us to navigate the volatility of the early days of the global pandemic well.
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