Market updates – Q2, 2020

Market Summary

• Most markets at or close to 3-month highs, with the US in the lead and Europe and the UK slightly lagging

• Outperformance of momentum and growth has reversed relative to value and cyclicals over the past few days, as business conditions start recovering

• However, uncertainty around the sustainability of market recovery continues with a potentially intensifying US-China trade tension and rising unemployment figures

• Near or medium-term outlook remains fragile, with the belief that yields will remain low for the foreseeable future

Positioning Summary

• Overall approach
  • Trade off upside for downside protection
  • Keep cash on hand to benefit from any opportunities
  • Favour high quality, growth, and defensive stocks until market recovery confirmed

• No significant increase in Equity allocation due to enduring uncertainty. However, staying invested into stocks expected to perform well or even benefit from Covid, as well as in the longer term (Tech, US utilities…)
• Swapped short maturity bonds for same issuer’s longer-term debt securities to benefit from higher yields and higher capital gains potential