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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 - Positioning for ongoing transformation in the global economy
  • GLOBAL TACTICAL ASSET ALLOCATION - Focus on risk management
  • UBP ECONOMIC OUTLOOK - Economic recovery still with downside risks
  • UBP ECONOMIC OUTLOOK - Inflation and monetary policy: new regime, new rules
  • GLOBAL BONDS - Favour EUR contingent convertible bonds
  • GLOBAL EQUITIES - An uncertain profit outlook for 2021
  • RECENT VIEW CHANGES - Extending protection and diversifying equity exposure into Asia

  • Enthusiasm for equities returned in August as COVID-19 cases peaked and declined once again in the US placing a floor on bond yields while the sharp rally in precious metals seen in July paused.
  • Our concerns about the 2Q earnings season were misplaced as earnings declines were more muted than expected in 2Q leaving full year 2020 expectations looking reasonable going forward. 2021 earnings expectations remain optimistic especially should a Biden Presidency bring increased corporate tax rates in the new year. These concerns may come into play closer to year-end.
  • With negotiations for additional US support payments stalled, near-term softness in the economy should be offset by the US Treasury which has become a key liquidity provider to US banks, injecting nearly USD 200 billion in August alone. With USD 1.6 trillion still in reserve, the Treasury can offer substantial liquidity support for markets heading into the November elections.
  • As a result, we continue to calibrate our exposure in portfolios, looking both to capitalise on the ongoing transformation of the post-pandemic global economy while managing risks and protecting capital into year-end.
  • To date, our portfolios have focused on healthcare, technology and broader transformation themes that have been accelerated by the pandemic earlier in the year. As we move into year-end, we expect opportunities to emerge in a number of focus sectors benefiting from the transformation driven by government spending in 2021.
  • A key anchor to funding this transformation will be money printing by the world’s central banks, led by the US Federal Reserve. Weakness in the US dollar to date represents the first stage of a multi-year bear market in the US currency leaving gold and the Swiss franc as primary long-cycle beneficiaries despite their strength in 2020.
  • With the Fed having shifted its policy for the first time since former Fed Chair Paul Volcker began his war on inflation in the 1970s, our pivot to an alpha-oriented focus in bond portfolios has proved fruitful. We continue to seek uncorrelated income and carry opportunities across global bond markets.
  • We have extended our protection strategies to more fully encompass the prospect of year-end instability with US elections and Brexit on the horizon.
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