Investment Update November 2020

Autumn smokescreen

In October, the downward trend which began in September continued on the equity markets in developed countries, which fell 2,5%.

In the final few weeks of the month, investors lost some of their risk appetite for a number of reasons: the rise in COVID-19 cases (particularly in Europe), the lead-up to the US elections and the lack of a new and much-anticipated stimulus package in the United States generated a great deal of uncertainty.

On the economic front, Q3 growth figures for developed countries were in line with expectations. After a catastrophic second quarter in which activity virtually came to a halt as a result of lockdown measures, markets bounced back.

However, positive Q3 figures are far from a guarantee that the recovery will continue in the final quarter of the year. The new lockdown plans announced in Europe are also a source of concern for economists and investors. Against this background, activity is likely to contract nearly as much as during the first wave of infections.

If volatility returns, it should be noted that the key factors in favour of retaining investments in equity markets are still present.

China, however, is gaining momentum. Its economic performance reflects the fact that the country is returning to growth: in annual terms, growth was around 5% in the third quarter. China is expected by the markets to be one of the few countries that will end the year in the black.

In general, it should be noted that the first line of defence against this risk of contraction is still public spending: monetary policies will remain accommodative and governments will need to implement new stimulus measures to mitigate the shock.

In the United States, investors are still expecting a new stimulus package, as negotiations remain at a stalemate between Democrats and Republicans as a result of the elections. Given that the US economic recovery is showing signs of weakening, investors have been eagerly awaiting the new stimulus package for several weeks, and it is expected to be agreed after the elections. The lockdown in Europe could also lead governments to increase their support for the economy through new stimulus measures.

If volatility returns, it should be noted that the key factors in favour of retaining investments in equity markets are still present. We believe that governments and central banks will again come to the rescue of economies and that rates will remain at historically low levels, which should quickly dispel fears and preserve equities' prominent positioning in asset allocation.

For these reasons, we eliminated our underweight position in equities and moved closer to neutrality.

We should not forget that equity markets are still experiencing a strong upward trend, particularly in the United States and Asia. From a geographical standpoint, we have a preference for the US and Chinese markets over Europe, as Europe's path out of the crisis appears difficult, given its more complicated economic and health situation.


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