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House views

03/12/2020

Macro Outlook

  • After the initial surge, growth is now set to moderate as economies enter the next phase of the recovery: the “flatter part of the swoosh”
  • There are relative winners (China, industrialised Asia) and relative losers. Europe faces a double-dip recession on the back of more stringent measures to control a pronounced second wave of Covid
  • Recent events have reduced key uncertainties around US politics and chances of an effective vaccine. We are reaching the end of the age of uncertainty
  • The global economy needs ongoing policy support. There is little risk of inflation in the near term

Investment views

Global growth prospects have materially improved on the back of recent vaccine developments. Substantial policy easing has reduced downside tail risks, while global geopolitical uncertainty is beginning to edge lower

US indices’ exposure to big tech companies and quality names is beneficial in our view. Cyclical parts of the market could benefit from fresh government stimulus measures and an economic rebound in 2021

Eurozone equities have been a major laggard in 2021, but can benefit from a year of recovery in 2021

An improving global economic outlook is likely to benefit UK indices’ heavy exposure to cyclical sectors which have lagged in their performance this year. The UK is likely to have favourable access to vaccines in 2021

Japanese equities are attractively valued but we think there are challenges in unlocking this value potential. Economic growth is structurally weak and Bank of Japan policy space is constrained

In our view, the outlook for EM asset classes has improved on the back of vaccine developments, and dollar liquidity conditions. The bright spot is EM Asian markets which can benefit from China’s V-shaped recovery

EMs outside of Asia can perform well in a recovery narrative, especially after their recent underperformance. The pace of vaccine rollout in these countries will be a key factor to monitor in 2021

  • Views are based on regional HSBC Global Asset Management Asset Allocation meetings held throughout November 2020, HSBC Global Asset Management’s long-term expected return forecasts which were generated as at 31 October 2020, our portfolio optimisation process and actual portfolio positions.
  • Icons:⬆ View on this asset class has been upgraded     No change   ⬇View on this asset class has been downgraded.
  • Underweight, overweight and neutral classifications are the high-level asset allocations tilts applied in diversified, typically multi-asset portfolios, which reflect a combination of our long-term valuation signals, our shorter-term cyclical views and actual positioning in portfolios. The views are expressed with reference to global portfolios. However, individual portfolio positions may vary according to mandate, benchmark, risk profile and the availability and riskiness of individual asset classes in different regions.
  • “Overweight” implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks, HSBC Global Asset Management has (or would have) a positive tilt towards the asset class.
  • “Underweight” implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks, HSBC Global Asset Management has (or would) have a negative tilt towards the asset class.
  • “Neutral” implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks HSBC Global Asset Management has (or would have) neither a particularly negative or positive tilt towards the asset class.
  • For global investment-grade corporate bonds, the underweight, overweight and neutral categories for the asset class at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, USD investment-grade corporate bonds and EUR and GBP investment-grade corporate bonds are determined relative to the global investment-grade corporate bond universe.
  • For Asia ex Japan equities, the underweight, overweight and neutral categories for the region at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, individual country views are determined relative to the Asia ex Japan equities universe as of 31 October 2020.
  • Similarly, for EM government bonds, the underweight, overweight and neutral categories for the asset class at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, EM Asian Fixed income views are determined relative to the EM government bonds (hard currency) universe as of 30 November 2020.

 

Source: HSBC Global Asset Management. As at 1 December 2020. The views expressed were held at the time of preparation, and are subject to change

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