Since we published our last outlook, many of the dynamics we observed have persisted – not least the recovery in asset prices and acceleration of long-term investment trends.
But given the nature of these persistent dynamics, in this case we have to invert an old aphorism: the more things stay the same, the more change we should expect. Looking ahead towards 2021, this gives us cause for both optimism and caution.
We now have a clearer sense of the collapse in global output caused by lockdowns and the initial speed of the recovery. This has led our economists to present a new central scenario for the world economy, involving continued but much slower growth over the next six months, followed by a renewed pick-up after vaccines become widespread next year.
And yet the picture remains unsettling, with new cases of COVID-19 still in the hundreds of thousands worldwide, the advent of mini-lockdowns and the fact that despite heartening progress, a vaccine is still not a done deal.
At the same time, the remarkable rebound in risk assets from their nadir in March means the remaining upside is likely to be limited, at least in the near term, even as policymakers pump out more and more stimulus.
In this autumn update, we offer views from our Global Fixed Income, Active Equity and Asset Allocation teams on the likely trajectory of markets. Key points they cover include:
• The long-term risks facing a credit market buoyed by stimulus
• How strong companies are growing stronger, even when stung by the virus
• Why markets and the real economy appear disconnected
Many investors, of course, are gripped by the US presidential race, which is heating up in its final months.
We are covering this subject in detail on the blog, but suffice it to say that the election is but one of the previously dormant geopolitical risks that may spark fresh bouts of volatility. Others worth mentioning are US-China tensions and the latest round of Brexit talks.
So on our journey to 2021, we will clearly need to traverse many more obstacles that require caution, making it something of an endurance test for investors. But some of the risks we face are, in fact, also catalysing opportunities.
Nowhere is this more evident than in the realm of responsible investing. The multiple challenges besetting the world – from the pandemic, to climate change, to ingrained racism – have prompted ever more investors to agree that inaction is simply not an option.
For us, they have only hardened our resolve to take further decisive action to deliver positive change, through the stewardship of our clients’ assets and the capital-allocation decisions we make on their behalf. We look forward to sharing more detail on these initiatives in the months ahead.