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September 2020

Global View Q4 2020 - Outlook

The global economy is recovering from the collapse in production in the spring caused by the many restrictions on mobility imposed at the peak of the coronavirus epidemic. Even with a highly expansive monetary and fiscal policy, the economy will take time to fully recover. We think the biggest risk in the coming months will be the uncertainty created by the US presidential election. We expect developed markets’ government bond yields to increase only moderately over the next 6 to 12 months, with higher inflation expectations being the main driver for the move. Such conditions should bring about more dollar weakness, and boost the gold price, while the Swiss franc seems poised to appreciate further over the medium-term. We still like EM hard currency bonds, yet caution against buying the lowest quality of the credit spectrum. The ongoing cyclical recovery will probably bolster equity markets until the end of 2020. A strong economic stimulus in China and Japan also is likely to boost Chinese equities and East Asian equity markets in general. We focus on IT companies and cyclical sectors like materials, industrials and consumer discretionary.

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