Multi Asset Portfolio – Outlook 2020 - Value driven choices should bring rewards
In their just released Multi Asset Portfolio Outlook 2020 titled “Value driven choices should bring rewards”, Societe Generale Global Asset Allocation Strategists present a portfolio built for navigating 2020.
The de-escalation of two extreme risks for global markets, the trade war and a no-deal Brexit, and its positive consequences on the real economy, will probably be the most important market driver in the early part of 2020. Relief on those two fronts could lead to further reallocation from bonds to equities, and reinvestment in Asia ex China, helping Japan equities but not the yen. Receding fears on the CNY could temporarily help the rest of Asia.
Our economic team still forecasts a short and shallow recession in the US by the summer, which clearly prevents us from being optimistic on equities. However, our economists now see fewer downside risks to their scenario, which leaves the door open to a balanced allocation (45% equities, 45% bonds) with a high degree of volatility control.
We expect equities to experience a 10-15% drawdown between the second and third quarters, in line with the mild cyclical slowdown in the US, before ending the year just slightly lower than today thanks to a V-shaped recovery in the fourth quarter in anticipation of a better 2021. But above all we highlight (and this is true across the asset classes) that we put significantly more emphasis than usual on the value segment. With credit so expensive, sovereign bonds provide much better protection than corporate bonds against the anticipated higher volatility in equities.
In coordination with Societe Generale’s strategists on all asset classes, and using quantitative, positioning and behavioural tools detailed in the report, the report presents an asset allocation designed to resist an expected cyclical slowdown in the US and to gear to a more supportive environment.
The report develops:
- key investment calls on themes such as “Hedge against a cyclical slowdown/recession”; “Gear positions to more expansionary fiscal policies”; “Take advantage of low inflation expectations”; “Watch for domestic drivers”; “US elections in 2020: get ready”; “Search for “quality” yield”; “Low-probability events that could gain momentum this year”.
- an editorial on the market outlook and the way to position, including “Hold on to a balanced portfolio”; “Add some value assets to hedge against upside risks”; “In bonds, prefer sovereign to corporate”; “Commodities: macro drivers dominating”; “Value vs Growth: a dead-cat bounce?”; “ESG: a cross-asset view”.
- economic scenario forecasts
- detailed review of asset classes – Cash, Equity, Fixed Income, Forex.
If you are an existing client, click here for direct access to the report.
About Societe Generale Cross-Asset Research
Societe Generale Cross-Asset Research is composed of more than 200 Analysts, Strategists, Economists and Quant, combining their expertise into ‘Research-based’ and innovative solutions suited to client’ needs: fundamental studies and expert views, investment ideas and long-term strategies, trade ideas and tactical baskets, thematic and systematic indices, quant solutions. On top of its established UK and Western European base, Societe Generale Cross-Asset Research benefits from a global coverage thanks to its presence in the US and in Asia (Hong Kong, Singapore, Tokyo and Bangalore) and Societe Generale local networks in Eastern Europe.
This editorial contains financial analysis which reflects the opinion of the Cross-Asset Research department of Societe Generale at the date of its publication. It does not necessarily reflect the views of the other departments of Societe Generale nor the official opinion of Societe Generale. This interview is dedicated to institutional and professional investors and is not deemed to be seen and used by retail investors for investment purpose. The viewers shall consult their own financial advisers to make their own appraisal.