August 31, 2020

COVID PARALYSIS RECEDES AS POLITICAL RISK RISES

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In Short

After a buoyant August for risk assets, the rally is likely to flatten out. Rising new infections into the autumn, a leveling recovery pace and diverse political risks (US politics, Brexit, geopolitics) will keep a lid on risk sentiment.
COVID PARALYSIS RECEDES AS POLITICAL RISK RISES
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Highlights:

  • After a buoyant August for risk assets, the rally is likely to flatten out. Rising new infections into the autumn, a levelling recovery pace and diverse political risks (US politics, Brexit, geopolitics) will keep a lid on risk sentiment.
  • Yet recovering data, committed central banks, falling Covid-19 lethality and optimism about vaccines still support a slight pro-risk bias.
  • We keep a prudent overexposure to risky assets, centred in high-quality buckets of Credit. Look to increase the pro-cyclical bias in portfolios as the Covid paralysis fades out

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COVID PARALYSIS RECEDES AS POLITICAL RISK RISES

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