The last few months have seen risky assets rally sharply. Policy from central banks has managed to mitigate the impact of coronavirus and bolstered expectations for corporate earnings and corporate solvency. Data from the US and China support the forecast of a 2021 rebound.
Of course, uncertainty in the markets remains high, though we do not expect another sharp decline similar to that which we saw in March. Asset prices are already accounting for lower corporate earnings in the latter half of 2020. Monetary and fiscal policy has also lessened the likelihood of another serious drop and, as ever, long term expected returns for equities remains positive.
It’s for this reason that we have decided to start gradually realigning portfolios towards their pre-coronavirus risk levels. Our positioning remains conservative but we are moving to take advantage of opportunities that have arisen in some asset classes.
The aims of the rebalance are, on the one hand, to take advantage of the opportunities created by the market turbulence, while on the other hand to reposition the portfolios to their target risk levels, suitable in an environment that is seeing high (but decreasing) volatility.
Our portfolios remain conservative and the risk increase is cautious and gradual, to protect your wealth without missing out on potential opportunities.
