The GISG believes that, after substantial falls in prices, risk assets (equities and corporate bonds in particular) have become attractively priced relative to their long-term prospects. The GISG’s view is that risk assets (equities) will outperform insurance assets (bonds) over the next 18 months.
This is based on the assumption that the financial system itself is resilient and that the monetary and fiscal policy measures taken by central banks and governments worldwide will substantially protect the fabric of the world economy while it is in voluntarily “shut down” (on a rolling basis) to control the viral load on healthcare systems.
Download the Global Investment View Q2 2020
A modest tilt towards more risk; long-term earning power of the global economy recognised
“This move does not call the bottom in share markets,” he continues. “In the next couple of months, the news flow will be appalling. It will be hard to hold fast, let alone increase risk exposures in such conditions.”
Haynes highlights that the risk-on tilt is modest. “If equity markets fall further and our central expectation that ‘this too will pass’ is not challenged, we would expect to add further to our recommended risk budget.”
This move does not call the bottom in share markets. In the next couple of months, the news flow will be appalling. It will be hard to hold fast, let alone increase risk exposures in such conditions.
John Haynes, Chairman, Investec Global Investment Strategy Group
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