July 6, 2020

INVESTMENT VIEW Q3:
COV-IDEOLOGIES

Share on facebook
Share on twitter
Share on linkedin
Share on email

In Short

After the rescue. As we enter the 20H2, Covid-19 is still lurking around, and influ-encing our social and economic behaviours. The number of new daily cases globally is at a new high.
INVESTMENT VIEW Q3:
COV-IDEOLOGIES
Share on facebook
Share on twitter
Share on linkedin
Share on email

Highlights:

  • The aftermath of the Global Covid Crisis (GCC), marked by elevated government and non-financial corporate debt, dif-fers from that of the GFC (households and bank debt). Bigger states, interventionism, deglobalisation, QE for longer, more taxes, bond-friendly regulations etc. are all part of the post-GCC world.
  • We analyse ‘new behaviours’ in more depth in our upcoming White Paper: ‘Life after Covid: the LDI view’. They do not bode well for potential growth. The illusion of a V-shape recovery, however, will support risk sentiment over summer.
  • The autumn looks more challenging, as the pandemic might put more pressure on the health systems, the recovery flattens out and political risks rise (“blue wave” at US elections? “Bare bone” Brexit deal?)
  • Because timing market turns perfectly is so hard, we enter summer with an only moderate pro-risk bias, focused on IG Credit. We take selective credit risk: prefer hybrids, AT1 and Fallen Angels to High Yield. Expect corporate defaults to peak below the post-GFC level, but to stay high for longer, while recovery rates risk being lower.
  • We argue against short duration positions, even in the context of the V-shape illusion. Tactically, cyclical stocks are better positioned than Value, but the structural challenge is to source new Growth engines. The US dollar is set to pull back further.

 

Download the full publication below

INVESTMENT VIEW Q3:
COV-IDEOLOGIES

Also interesting

size 3
July 29, 2021
Market Commentary

COVID-19 UPDATE Facts & Figures – 29/07/2021

federal-reserve-building-with-twenty-dollar-bill-on-grunge-texture-picture-id175716236
July 28, 2021
Market Commentary

MARKET COMMENTARY – The Fed: the recovery is on track, tapering is approaching

EU flag green
July 26, 2021
Focal Point

ECB greening of the credit market to start in 2022