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House views

17/02/2021

Macro Outlook

  • We are in the restoration phase of the economic cycle. Activity remains below pre-Covid levels, everywhere except China
  • The pace of recovery will depend on where we are in the world, on the delivery of the vaccine, and on continued policy support. In some laggard economies, there is scope for cyclical catch-up in 2021
  • High unemployment rates, stressed corporate balance sheets, and fragile confidence means that the global economy needs ongoing policy support
  • Near-term volatility aside, inflation is likely to remain modest over the medium term, but upside risks have increased in the US

Investment views

Global economic recovery prospects are boosted by the rollout of vaccines. Policy remains supportive, not least the prospect for further major US fiscal stimulus, while global geopolitical uncertainty has edged lower

US indices’ exposure to big tech companies and quality names is beneficial in our view. Cyclical parts of the market could benefit from fresh government stimulus measures and an economic rebound in 2021

We see scope for the region’s markets to play catch up following last year’s underperformance. A strong cyclical recovery later in 2021, a dovish ECB and generous government income support schemes are also positives

An improving global economic outlook is likely to benefit UK indices’ heavy exposure to cyclical sectors which have lagged in their performance over the past year. The UK’s immunisation programme is progressing rapidly

Japanese equities are attractively valued but we think there are challenges in unlocking this value potential. Economic growth is structurally weak and Bank of Japan policy space is constrained

We think the outlook for EM asset classes remains broadly positive amid a backdrop of global economic recovery and US dollar weakness. The bright spot is EM Asian markets which can benefit from China’s strong recovery

EMs outside of Asia can perform well in a backdrop of global economic recovery and higher commodity prices, but new virus variants and slow vaccine rollout remain key challenges

  • Views are based on regional HSBC Global Asset Management Asset Allocation meetings held throughout January 2021, HSBC Global Asset Management’s long-term expected return forecasts which were generated as at 31 December 2020, our portfolio optimisation process and actual portfolio positions.
  • Icons:⬆ View on this asset class has been upgraded     No change   ⬇View on this asset class has been downgraded.
  • Underweight, overweight and neutral classifications are the high-level asset allocations tilts applied in diversified, typically multi-asset portfolios, which reflect a combination of our long-term valuation signals, our shorter-term cyclical views and actual positioning in portfolios. The views are expressed with reference to global portfolios. However, individual portfolio positions may vary according to mandate, benchmark, risk profile and the availability and riskiness of individual asset classes in different regions.
  • “Overweight” implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks, HSBC Global Asset Management has (or would have) a positive tilt towards the asset class.
  • “Underweight” implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks, HSBC Global Asset Management has (or would) have a negative tilt towards the asset class.
  • “Neutral” implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks HSBC Global Asset Management has (or would have) neither a particularly negative or positive tilt towards the asset class.
  • For global investment-grade corporate bonds, the underweight, overweight and neutral categories for the asset class at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, USD investment-grade corporate bonds and EUR and GBP investment-grade corporate bonds are determined relative to the global investment-grade corporate bond universe.
  • For Asia ex Japan equities, the underweight, overweight and neutral categories for the region at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, individual country views are determined relative to the Asia ex Japan equities universe as of 31 December 2020.
  • Similarly, for EM government bonds, the underweight, overweight and neutral categories for the asset class at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, EM Asian Fixed income views are determined relative to the EM government bonds (hard currency) universe as of 31 January 2021.

 

Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change

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