Viral uncertainties

The Covid-19 virus is turning from a regional health crisis to a global issue; uncertainties about the global economic impact have been rising sharply. After weeks of resilience, equity markets have sold off in late February, catching up with the safe-haven rally in core bonds seen earlier.

Highlights:

  • With Covid-19 going global, we scale back the previously cautious pro-risk bias in our portfolios.
  • Markets are already discounting quite some bad news and may be prone for a rebound once global infections start to recede.
  • That said, a global pandemics can no longer be ruled out. Amid very high uncertainties about further contagion and the economic fallout, we reduce our tactical equity exposure to neutral.
  • As expected IG Credit has been resilient, with the fall in risk-free rates exceeding the widening in OAS spreads. We keep but reduce our overweight, with a preference for non-financials on continued support from the ECB’s asset purchase program.

Download the full publication below

INCORPORATING QUANT SIGNALS INTO EU EQUITY SECTOR/STYLE STRATEGY: MAINTAIN A TILT TO CYCLICALS AND VALUE

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