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Early March 2020 Edition: Updated Return Forecasts and Markets Outlook Papers

The Calm before the Storm

Savvy Investor has collated the latest in institutional thinking about asset class returns and the outlook for investment markets. Although these reports were prepared before the coronavirus outbreak statistics began to gather momentum, some strategists were already making tactical adjustments, reducing Emerging Markets equity exposure in favour of Developed Markets equity. This is in spite of China's weight in both MSCI (equities) and Barclays (bond) indices being gradually increased.

A global external shock like COVID-19 was evidently not priced into financial assets; some commentators are only just beginning to suggest that earnings declines of perhaps 25% in China and between 10%-15% in Europe might now be expected. The extent to which the economic impact of coronovirus might be mitigated by central bank or government fiscal stimulus is yet to be determined, but some sort of concerted policy stimulus looks increasingly likely. With a fast moving story like coronavirus and its effect on markets, it is difficult for institutional thinking in Markets Outlook commentary to stay 'current' for long.

storm over still lake


FEATURED PAPERS


Monthly Market Monitor (Eaton Vance, Feb 2020)

For compliance reasons, this paper is NOT accessible in the United States and Canada

In its Monthly Market monitor, Eaton Vance provides a distilled view of economic and asset class data via the use of charts and brief synopses.

Is Inflation Frozen Too? Should the Fed let it go? (BMO GAM, Feb 2020)

Despite the U.S. economy having expanded for the decade since the global financial crisis, inflation has remained resolutely low. BMO GAM explores the reasons for this.

Going Global in Equities (MFS IM, 2020)

MFS IM investigates changes to the global equity opportunity set over the past decade, and questions if investor equity allocations are best optimised to capture that opportunity. They also outline practical considerations for consideration when allocating to global equities.


CAPITAL MARKET ASSUMPTIONS


2020 Capital Market Assumptions (Callan)

Callan's latest long-term capital market assumptions paper outlines its expected returns and other critical metrics for the major asset classes.

Q1 2020 Long-Term Capital Market Assumptions - USD (Invesco) 

For compliance reasons, this paper is only accessible in certain geographies

Invesco presents its long-term estimates on how they expect major asset classes to behave for the next ten years. This latest paper contains Invesco's most recent return estimate changes and explains the methodology behind the calculations.


ECONOMIC OUTLOOK


Economic Outlook: When China sneezes… (OIES, Feb 2020)

Michal Meidan of the Oxford Institute for Energy Studies investigates the effect that the coronavirus outbreak has had on China’s oil, gas and chemical demand.  

European Economic Forecast, Q1 2020 (European Commission)

The Winter 2020 interim forecasts from the ECB outlines the prospects for each of the E.U. member states while offering insights into the Euro area as a whole.

Fidelity Analyst Survey: Cycle, what cycle? (Fidelity Intl, Feb 2020)

For compliance reasons, this paper is only accessible in the UK & Europe

Fidelity International's latest Analyst Survey notes the unprecedented length of the current economic cycle. Observing that many of the usual late-cycle imbalances in services appear absent despite manufacturing remaining in recession, they wonder if 'cycle' is indeed the right description.


ASIA


Asia Quarterly Bulletin (Columbia Threadneedle, Feb 2020)

This Quarterly Outlook paper on Asian investment markets is provided by Columbia Threadneedle.

China and the World: Inside the dynamics of a changing relationship (McKinsey & Company, 2020)

McKinsey & Company investigates how the relationship between China and the rest of the world has been changing over time. As the Chinese economy transitions from being one led by foreign investment to a domestic consumption story, and with trade tensions rising, has peak integration between China and the world already been seen?

Eye on the Market by Michael Cembalest: COVID-19 update (JP Morgan AM, Feb 2020)

Michael Cembalest of JP Morgan AM offers insights and opinion on the coronavirus outbreak and its potential impact on global company earnings and economic growth.


FIXED INCOME


Podcast: Fixed income markets in the new decade (Federated Hermes, 2020)

Prospects for fixed income markets and factors likely to influence investment decisions and returns over the next decade are discussed by Federated Hermes' Andrey Kuznetsov and Eoin Murray in this podcast

Fixed Income Perspectives (Capital Group, Feb 2020)

For compliance reasons, this paper is only accessible in certain geographies

In this 15 page report from Capital Group, they provide a round up of global fixed income market prospects.

Q1 Fixed Income Outlook 2020 (Federated Hermes)

For compliance reasons, this paper is NOT accessible in the United States

Andrew ‘Jacko’ Jackson, Head of Fixed Income and his team at Federated Hermes consider the opportunities that exist in bond markets.


ALTERNATIVES & MULTI ASSET


Corporate M&A Report 2020 (Bain & Company)

This second annual Global Corporate M&A report from Bain & Company reviews the last year, notes that PE firms have $2.5 trillion in 'dry powder' which needs deploying, examines how dealmaking is changing (many more public-to-private deals) and suggests ways in which companies need to evolve to remain successful.

2020 Global Private Equity Survey (EY)

EY’s recent survey of the global private equity industry suggests that PE firms need to act as catalysts of change in order to face the challenges ahead.  

Annual U.S. Real Estate Outlook (UBS AM, Jan 2020)

UBS AM's US Real Estate Outlook 2020 provides guidance to aid investment decisions in the year ahead.

Cross Asset Investment Strategy (Amundi AM, Feb 2020)

For compliance reasons, this paper is NOT accessible in the United States

Strategists at Amundi AM offer their views on a variety of asset classes, risk factors that investors should consider, and the prospects for the global economy.

Multi-Asset Allocation Views: Why the bull run in global equities could continue (Aviva Investors blog, 2020)

For compliance reasons, this paper is only accessible in certain geographies

Sunil Krishnan, Head of Multi-asset funds at Aviva Investors, discusses the reasoning behind the assertion that global equities may continue to rise, and highlights the relative attraction of Brazil amongst EM.