Covid-19 is a major challenge for the global economy. But market pricing is broadly consistent with our baseline scenario of a “swoosh” style recovery. Substantial policy easing has reduced down-side tail risks
US indices’ exposure to big tech companies and quality names is beneficial in our view. Cyclical parts of the market could benefit from
fresh government stimulus measures
Policy progress has been substantial, particularly with the EU’s new joint recovery fund. Investors may also reach for potential gains outside of the US amid the ongoing “swoosh recovery”
Policy support has been substantial. Investors may be attracted to the exposure of UK indices to cyclical sectors as the “swoosh” recovery progresses. But the balance of risks points to a neutral position
Japanese equities are attractively valued but we think there are challen-ges in unlocking this value potential. Economic growth is structurally weak and Bank of Japan policy space is constrained
In our view, the bright spot is EM Asian markets which can benefit from China’s growth recovery and further policy actions. Ultra-loose Fed policy and lower oil prices are significant tailwinds to many EM economies
Low commodity prices is a headwind to already weak growth momentum in Latin America and Russia. Many EM economies (mainly outside of Asia) have limited capacity to manage the current health and economic crises
Source: HSBC Global Asset Management. As at 2 November 2020. The views expressed were held at the time of preparation, and are subject to change.
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