韦莱韬悦-全球资产价格走势和展望（英文）-2020.7-7页_285kb

Global Markets Overview Summary

Core Content

This document provides an overview of global market conditions and investment outlook as of July 2020, with a focus on the impact of the COVID-19 pandemic on economic activity, asset prices, and policy responses. It outlines the current state of various asset classes, including government bonds, corporate credit, and equities, and discusses the long-term implications for investors.

Main Outlook and Key Points

1. Economic Outlook

• Uncertainty and Divergence: The recovery path of the global economy remains highly uncertain due to varying virus case numbers and differing fiscal and monetary policy responses across countries.
• China:
  • Reached its GDP low point in February 2020.
  • Recovered sharply, driven by manufacturing and investment sectors.
  • Expected to continue its economic recovery.
• US and Europe:
  • Experienced a major recession in Q1 and April 2020.
  • GDP growth picked up notably in May and June 2020.
• Sectoral Impact:
  • Service sectors (aviation, travel, tourism) are likely to be hardest hit.
  • Full normalization of economies may take several years.
• Small and Medium Businesses:
  • A significant portion of employment is tied to these businesses.
  • Liquidity and default risks could severely impact incomes and spending.

2. Investment Outlook

• Higher Return and Risk Regime:
  • The document forecasts a shift to a higher return and higher risk regime over the next five years, following the acute changes in bond, credit, and equity pricing.
• Investor Actions:
  • Assess risk tolerance.
  • Maximize diversity in portfolios.
  • Remove unrewarded risks.
  • Carefully manage liquidity needs.

Asset Price Movements

1. Government Bonds

• Developed Markets:
  • Eurozone: 1y/cash yields at -0.57%, 10y yields at -0.49%.
  • US: 1y/cash yields at 0.17%, 10y yields at 0.67%.
  • Japan: Yields are at historic lows.
• Pricing Inflation Expectations:
  • Inflation markets are pricing in that US inflation will remain significantly below the central bank’s target over the next decade.
• Central Bank Policies:
  • Central banks have eased aggressively to provide liquidity and manage income shocks.
  • Policy rates are at or near lower bounds, and asset purchases are ongoing.

2. Corporate Credit

• Investment Grade:
  • Global spreads have fallen, but are still priced in an allowance for above-average credit losses.
  • High quality credit assets are approaching levels where they can provide reasonable returns above government bonds.
• High Yield:
  • Credit spreads have fallen, but implied default rates have increased significantly above long-term averages.
  • Pricing reflects a pessimistic outlook for corporate credit.
• Vanilla Speculative-Grade Credit:
  • A somewhat cautious outlook is retained due to short-term risks.
  • Current pricing implies an above-average level of defaults relative to historical norms.

3. Equities

• Market Performance:
  • Equity prices have risen, but earnings expectations have fallen, leading to higher forward P/E ratios.
• Earnings Outlook:
  • A material earnings recession is expected in both developed and emerging markets in 2020.
  • Recovery will depend on the effectiveness of fiscal and monetary policies.
• Valuation Metrics:
  • Developed market valuations are high, reflecting expectations of relatively stable earnings.
  • Emerging market valuations are lower, reflecting higher virus and economic risks.
• China:
  • Market pricing implies flat earnings growth over the next five years.
  • This overstates downside risks, according to the report.
• MSCI World and EM Indices:
  • MSCI World equity index has high valuations.
  • MSCI EM index has lower valuations, consistent with higher risks.

Key Economic and Market Indicators

1. Daily COVID-19 Cases

• US: High and rising.
• China and Europe: Flat and low.
• Large Emerging Markets: Brazil, India, and South Africa are seeing rising cases.

2. Economic Recovery

• China: Manufacturing output has fully recovered to end-2019 levels.
• US: Mobility has risen since April, supporting spending, but has slowed with rising cases.
• Germany: Economic mobility has steadily increased since April.

Summary of Market Pricing and Outlook

Disclaimer

• The document is for general information only and not a substitute for professional advice.
• It does not provide investment, legal, accounting, tax, or other professional recommendations.
• No financial decisions should be based on this material without seeking specific advice.
• The data is based on information available at the time of the document and may not reflect subsequent developments.
• No liability is accepted for errors or misrepresentations in third-party data.