How far from normal?
August 27, 2020

How far from normal?

Paul Jackson. Global Head of Asset Allocation Research and András Vig. Multi Asset Strategist

Global stocks are back to where they were in January, many economies have rebounded and Covid-19 infections and deaths seem to have flat-lined. Are we approaching normality?

To answer this question we review some old metrics (Covid-19 data by region, latitude and age structure, along with mobility and stringency indices versus economic growth). We also add some new measures, including a health versus wealth trade-off and positive rates.

The good news is that global daily cases and deaths seem to stabilising and economies have rebounded. The bad news items are that easing of lock downs seems to provoke more infections, that the Northern Hemisphere winter will soon be upon us and that many of the government measures to support corporate and household cash flows will soon end.

Though the worst economic performance may be behind us, we worry that collateral damage is only now being revealed (see UK job losses as furlough schemes end, for example). Further, even if lock downs are now localised rather than national, it is hard to imagine a smooth recovery path from here.

Hence, we are worried that economic momentum will no longer provide unstinting positive support for cyclical assets (as it has done since early April), which argues for a diversified model asset allocation.

For our more in-depth assessment click here.

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

  • Data as at 21.08.2020, unless otherwise stated. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.

    Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.