A shot in the arm

In Short

The outstanding risk rally in November may appear reckless amid resurgent Covid cases, persistent risks of a hard Brexit and a (likely) split new US government taking office in January. The broad-based rally (comprising also Credit, EMs and Commodities) may seem reckless. Lockdowns in Europe may persist over the winter, while laissez-faire in the US warrants a sharply rising death toll. Daily Covid casualties exceeded 2,000 in the US even before Thanksgiving, a potential national superspreader event.
Market Perspectives

Highlights:

  • The outstanding risk rally in November may appear reckless amid resurgent Covid cases, persistent risks of a hard Brexit and a (likely) split new US government taking office in January.
  • Yet markets are right in pricing recent vaccine news as a game changer for the pandemic while central banks remain committed to extended stimulus.
  • We thus slightly extend our pro-risk tilt, with a sizeable overweight in Credit and (more prudently) in Equities. A weakening US dollar favours exposure to EMs. Cash and Core Government Bonds remain unattractive.

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MARKET PERSPECTIVES 12/2020 - A SHOT IN THE ARM

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