Multi-Asset Perspectives

We believe the economy will grow well above trend throughout 2021, as massive pent-up consumer demand is released by vaccination progress, states reopening and highly accommodative government policy.

Our outlook continues to be that economic recovery is in the offing and will broaden into synchronous, global expansion. Segments of the economy that were protected from the pandemic should stay in a healthy holding pattern.

With two COVID-19 vaccines approved in the U.S. and more fiscal stimulus about to be deployed, there is a clear bridge (vaccine) to post-COVID normalcy and abutments (stimulus) that should keep the recovery on course. 

Despite the recent coronavirus surge and probable upcoming socially isolating, winter hunkering required, we think stocks can continue to hold their own against bonds.

We continue to believe that risk-assets are worth the discomfort of uncertainty.

Market sentiment is looking ahead to the end of the COVID-19 pandemic, probably in the first half of 2021, when an effective vaccine is widely distributed. An end date on the horizon is certainly a good thing for stocks.

We expect a big bounce in 3Q20 global growth, but because an effective COVID-19 vaccine is unlikely until mid- to late-2021, further gains in 4Q20 and 1H21 will prove more difficult.

As U.S. COVID-19 cases increase, so does the risk that economic recovery decelerates. We think policy makers will do what it takes to sustain the recovery, and therefore continue to prefer U.S. equities over bonds.

Despite our expectations for a dreadful drop in 2Q20 output, we believe a recovery will commence in 3Q20 and lead to a meaningful acceleration beginning in 2021. Accordingly, stocks still look more attractive to us than bonds.

We are still overweight U.S. large caps, believing winners will win until a broad-based economic recovery takes hold. Our preference for investment grade U.S. bonds remains; also, we now see opportunities among high yield bonds.