The COVID-19 induced financial crisis has caused an economic collapse in both supply and demand. In addition, it has also accelerated existing trends such as de-globalisation and trade tensions, while further exposing cracks in the socioeconomic fabric of the society.
A new investment playbook?
The aggressive actions by governments around the world, utilising the dual force of fiscal and monetary policies, have severely distorted the markets. Equity markets have generally retraced their losses from the 25-30% drop in March, despite a precarious economic situation illustrated by disastrous GDP and unemployment figures.
It reminds us of an old cliché: Don’t bet against the Fed!
This compounds the difficulties that investors face in constructing resilient portfolios for the long term. Perhaps a new playbook is required, superseding traditional portfolio construction strategies.
Investment implications of the changing global macro environment:
- Supply and demand shocks
- Fiscal and monetary stimulus
- De-globalisation and dis-integration of global supply chains
- Polarisation: Economic, social and political
- Geopolitics: US vs China
Re-defining approaches to asset allocation in the new regime:
- Distortion in equity-versus-bond correlations due to continued central bank interventions: How does diversification work?
- Negative and zero-bound rates: Efficacy of bonds and duration-focused strategies?
- Differentiated recovery modes across developed and emerging markets: Opportunities for idiosyncratic alpha?
- Making sense of geopolitics in investment decision-making
- Preparing for inflation surprise or deflationary shock?
Enquire about this event