This weekly update provides a snapshot of changes in the economy and markets and their implications for investors.
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The COVID-19 outbreak has pushed the global economy into recession and equities likely have further to fall. We are overweight cash and duration and modestly underweight equity and credit. We expect to stay nimble in our relative value positions.
The Federal Reserve announced new programs on March 23, 2020. Global Liquidity Portfolio Manager, Kyongsoo Noh, discusses these new facilities from the Fed.
We raised the probability of Recession to 55% after virus-induced shocks, oil prices’ collapse and violent market volatility. We are de-risking, adding very high quality duration, while expecting credit markets to cheapen and reserve currencies to do well
Brexit uncertainty is not over. But that wasn’t the only thing holding back UK stocks, and investors could be tempted back to the market.
We emerged with a cautious near-term view from our latest quarterly strategy meeting in early September. In our base case scenario, the global economy is expected to narrowly avoid recession and continue to grow, albeit much more slowly.
We expect another positive year for emerging market debt in 2020, with base case expectations of about 8% returns for emerging market hard currency, and 11% for emerging market local currency.
While Europe faces some of the macro challenges that have plagued Japan for the last 30 years, investors shouldn’t oversimplify and extrapolate into a dismal outlook for European stocks.