2020 Midyear Investment Outlook

Covid-19 Alters the Storyline, But Key Themes Endure

11 June 2020

When contemplating our 2020 investment outlook at the end of last year, the world was a very different place. The coronavirus had yet to emerge and tighten its grip; the prospect of a global recession was still seemingly at a comfortable distance, not a stark reality; and the possibility of an event that could spur the massive central bank and fiscal stimulus policies we’ve seen in recent months would have seemed unfathomable.

The human and economic toll of the Covid-19 pandemic has been staggering. Yet hopeful signs are emerging every day, with economies beginning to reopen and the outlook for viable treatments and vaccines looking brighter. As we look to the second half of 2020, we are hopeful that applying lessons learned may help avoid a repeat of the unprecedented global shutdowns witnessed so far this year.

Here, we gather viewpoints from our senior investment leadership about what investors might expect in the coming months, how to prepare, and how to tap opportunities emanating from the market disruptions we’ve seen and will likely continue to see.


Four Themes to Watch in the Second Half

The interaction of macro factors, policy, and politics will continue to provide a framework for navigating the post-Covid future. Chief Economist Markus Schomer, CFA, explains how these drivers inform four key themes we’re watching as we enter the second half of 2020.


Brightening Skies

While markets have priced in a fair degree of optimism given signs of a potentially stronger and quicker recovery, pockets of more bearish sentiment remain. Michael Kelly, CFA, Global Head of Multi-Asset, explores what he expects along with his team’s asset class convictions.

Fixed Income:

A Policy-Driven Snapback

Spreads across most fixed income asset classes tightened rapidly in the second quarter, and may settle into a trading range for the remainder of the year in which subsequent movements are more gradual, reflecting shifts in fundamental economic and earnings expectations. Steven Oh, CFA, Global Head of Credit and Fixed Income explores what he sees in the second half of the year and into 2021 as markets normalize.


Getting Back on Track

Our neutral stance in the fourth quarter of 2019 reflected high equity valuations that left little room for further increases in expectations. After a volatile spring, we turned positive and remain constructive, seeing areas with attractive return potential, although we continue to be selective. Anik Sen, Global Head of Equities, explores why he believes now is the time to invest in the world-class companies of both today and tomorrow.

Asian Fixed Income:

Navigating Opportunities in an Uneven Recovery

Asian fixed income withstood the worst of the Covid-19 volatility in the first quarter, thanks to strong credit fundamentals and favorable technicals built over recent years – demonstrating yet again its resiliency.

Asian Equities:

Why the Shape of Recovery Is Tough to Discern – and Not Our Key Focus

Regional markets, led by China, rose in recent weeks as better economic data and post-lockdown reopenings improved market sentiment. Despite China’s recovery, forecasting the shape of Asia’s recovery remains difficult given the lack of near-term earnings visibility. This uncertainty will likely lead to a downgrade in earnings, making stock selection critical.