Short-term investment outlook-November Update

Factor portfolios based on quantitative characteristics such as value, momentum, quality, size and low volatility have historically generated attractive excess returns, outperforming market cap benchmarks on a risk-adjusted basis.
While single factors have outperformed over the long-term, they have also experienced strong cyclicality, occasionally leading to extended periods of underperformance driven by changing market environments.
We believe investors can exploit these distinct macro sensitivities among factors, developing dynamic rotation strategies driven by forward-looking macro regime frameworks, with the potential to outperform static multifactor portfolios while maintaining diversification to multiple factors.
November 2020 update
- The probability of a double-dip recession in Q4 2020 is certainly increasing across multiple regions, but it does not need to translate into the same economic and financial shock experienced with the first wave.
- Our forward-looking measures of economic activity and market sentiment continue to suggest the global economy should remain in a recovery regime.
- We maintain a higher risk posture than our benchmark1 in our Global Tactical Asset Allocation model, sourced through an overweight exposure to equities, with a tilt towards emerging markets (EM), value and (small) size, and credit at the expense of government bonds.
1.Global 60/40 benchmark (60% MSCI ACWI / 40% Bloomberg Barclays Global Agg USD Hedged).
