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Global Markets Overview: December 2020

Investments
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By David Hoile | December 22, 2020

Tracking recent asset price moves and our outlook

Our Global Outlook

  • First, the EU and the UK are finalising the terms on which the UK will leave the single market and customs union once the transition period ends on 31 Dec 2020
  • Second, selective assets across niche alternative credit markets, private debt, and real estate provide good return prospects currently
  • Third, allowing for uncertainty, our outlook is as follows: China GDP reached its low point in February and has recovered sharply, led by its manufacturing and investment sectors – we expect a broad economic recovery to continue. The US and Europe experienced a major recession in Q1 and April. GDP growth in these and other advanced economies started to pick-up notably in May and June. Although, the latest economic data points indicate the pace of recovery has slowed in the last three months. The recent announcements of effective vaccines increase the likelihood of them being produced and distributed at scale in the first half of 2021. This reduces uncertainty over the shape of recovery in the world. Nevertheless, we still expect large divergences between countries given large differences in the number of virus cases in the short-term, the size of fiscal and monetary policy responses, and other political and geopolitical factors (e.g., global trade relations).
  • Fourth, recent market moves have been severe but, in our view, provide a reminder about the regular actions investors can undertake. We will always face systemic risks, whether they are economic, societal (such as COVID-19) or environmental. Thinking carefully about the following actions will provide more resilient and, ultimately, more successful portfolios over time:
    1. The level of risk one can tolerate;
    2. Maximising the amount of diversity;
    3. Removing unrewarded risks;
    4. Carefully thinking through and managing liquidity needs.
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