Quarterly Investment Letter - December 2020
Executive Summary
2020 was a defining and historic year, characterised by an unprecedented global health crisis and peacetime policy response. We emphasised early on the pitfalls of market timing in a crisis and as a result most of our multi-asset portfolios ended the year with competitive positive returns
The contrast between the current economic freeze and future optimism suggests it’s darkest before the dawn. There is a realistic prospect of the pandemic improving over the coming months as the vaccination roll-out accelerates and winter turns to spring in the Northern Hemisphere
Against the backdrop of a meaningful moderation in the pandemic and reduced geopolitical risks, we identify three key drivers for markets and our investment strategy in 2021:
- Risk assets will remain well supported by a favourable mix of economic recovery and expansionary monetary and fiscal policy
- The equity market dominance of ‘pandemic beneficiaries’, such as mega-cap technology stocks, will subside as the recovery broadens and new leaders emerge
- Environmental, Social and Governance (ESG) factors will be emphasised as drivers of core capital allocation
2020 reminded us all of the future’s unpredictability. There are multiple risks that we can identify and evaluate investment strategy against, in particular:
- The potential for the pandemic to persist for longer than expected despite vaccines and other treatments
- How quickly the global economy can rebound should unemployment benefits be rolled back too soon
Above all, we look forward to meeting with you once again in 2021.
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