Top of Mind Back to before or protracted pain ahead?

After a tumultuous first half of 2020, what comes next for the pandemic, the economy, and the markets? Multi-Asset Strategist Adam Berger considers several scenarios and offers a set of near-term and longer-term investment policy ideas.

Views expressed are those of the author and are subject to change. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional or institutional investors only.

This quarter’s "top of mind" topics

  1. Rebalancing to better prepare for a wide range of possible outcomes
  2. Opportunistic investments in credit, “compounder,” and contrarian strategies
  3. Revisiting long-term policy in light of questions about inflation, equity returns, and fixed income as a diversifier

The world is a very different place than at the beginning of the year, given the astonishing impact of COVID-19 on the economy and the markets. It’s also very different than at the end of the first quarter, with risk markets having rallied back from steep losses. Of course, what we all really want to know is not where we’ve been but where we’re headed. To help, I focus this quarter on three scenarios and an investment policy game plan for the coming months. I also address several longer-term investment policy questions on the minds of many asset allocators.

Where we are now

Before detailing my scenario analysis, a quick summary of the state of the world:

The pandemic — COVID-19 is still spreading, with the global case count accelerating and the seven-day moving average in the US on the rise again after many states began to ease restrictions. The economic impact is clear. Initial unemployment claims spiked in March, and although they have come down, they are still shockingly high relative to history, as are continuing claims.

Financial markets — The March sell-off in equities was followed by a remarkable reversal through late June. The S&P 500 briefly exceeded its 2020 starting point before falling off somewhat. Commodities also fell sharply but haven’t regained much ground. Fixed income spreads have narrowed significantly since late March but remain meaningfully wider than where they started the year.

Volatility — Volatility (VIX) bears watching. It has reflected the uncertainty of market participants about the nature of the crisis. One possibility is that the pandemic ends up as a true systemic event that is persistent and drives dramatic change in…

To read more, please click the download link below.

Recommended for you

2021 Investment Outlook
As we head into the new year, thought leaders from across our investment platform share their views on pressing questions.
November 2020
2021 Investment Outlook
,
2021 Multi-Asset Outlook
Will 2021 bring another roller-coaster ride for markets? Our 2021 Multi-Asset Outlook, looks at 2020's market rotation and offers investment themes for 2021.
November 2020
2021 Multi-Asset Outlook
,
Monthly Market Snapshot: October 2020
A monthly update on equity, fixed income, currency, and commodity markets.
November 2020
Monthly Market Snapshot: October 2020
,
Waiting to exhale: Election suspense and uncertainty
Macro Strategist Michael Medeiros, Global Investment Strategist Nanette Abuhoff Jacobson, and Geopolitical Strategist Thomas Mucha share their latest thoughts on one of the most pivotal, hotly contested elections in US history.
November 2020
Waiting to exhale: Election suspense and uncertainty
,
Insurance insights: Research and investment ideas
A curated collection of insurance insights intended to aid insurers in analyzing market dislocations and opportunities
November 2020
Insurance insights: Research and investment ideas
,
The dawn of divergence and the art of subtlety
Multi-Asset Strategist Nick Samouilhan highlights the key divergences we should start to see as fundamental differences between companies, sectors, and countries begin to matter more.
October 2020
The dawn of divergence and the art of subtlety
,
Why should investors study climate science?
Our director of sustainable investment discusses our partnership with Woodwell Climate Research Center and the tools we are developing to help investment teams and clients understand the economic impacts of climate change.
October 2020
Why should investors study climate science?
,
Endowments, foundations, and nonprofits: Research and investment ideas
Explore this curated collection of insights designed to help nonprofits navigate market dislocations and opportunities.
October 2020
Endowments, foundations, and nonprofits: Research and investment ideas
,

We use cookies to improve your experience on our website. To accept cookies click Accept & Close, or continue browsing as normal. For more information, visit Cookies & Tracking NoticE.