10 Major Investment
Implications (and 32 charts!) of a Weak US Dollar (Advisor
Perspectives, 7 min read) Segments of the stocks market (value, small-cap,
EM) where investors are currently underweight may do well in a weaker USD
environment. Precious metals and real assets also tend to outperform equities
during falling USD periods. Also, credit outperforms stocks, and copper also
fares better than gold.
The End of the Beginning (KKR, 30 page
read) They see a square root-shaped recoveryby 2021rather
than a V-shaped one. KKR is bullish on real assets, including infrastructure
(data centres and optical due to digitalisation growing), real estate (housing,
warehouses and logistic due to e-commerce growing), gold and TIPS (upside
inflation surprise). They reasoned a 60/40 portfolio would not generate
significant returns going forward, which also makes them bullish real assets. [Bullish Real Assets]
Views From the Floor (Man
Institute, 4 min read) Man Institute forecasts long-term negative returns
of equities (using Shiller CAPE) and US bonds. The only time the outlook for
both assets was simultaneously so weak was during the Great Depression,
underlining that the traditional 60/40 portfolio construction could pose a
challenge for investors in the future. [Bearish 60/40 Portfolio]
Why USD Fixed Income May Look
Increasingly Attractive to European Investors (Amundi,
7 min read) US fixed income could provide diversification benefits to
European investors. Hedging cost has also fallen from 3.64% in 2018 to 0.85%
currently, and it could decline further as EU growth rebounds. [Bullish US Fixed Income]
US 2020: The COVID Election –
Part II (State Street, 6 min read) State
Street sees a risk of higher inflation under a Biden presidency than a Trump
second term. With this backdrop, they prefer real assets such as commodities,
Real Estate Investment Trusts and Treasury Inflation-Protected Securities. They
also see individual equity or sector selection to be more rewarding (i.e. green
industries to do favourably with regulatory pivot encouraging capex) than broad
large-cap indices exposure under a Democratic policy mix.
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