Setbacks from the latest
market wobble which have been caused by worries about the speed of economic
recovery, the potential for a further acceleration in Covid cases and some
political risks, so far look to be manageable.
I concluded last week’s Digest
with the following sentence: “All of the factors mentioned above create the
environment for a possible market wobble in the short term, or at least
increased levels of volatility.” Those factors included worries about the speed
of economic recovery, the potential for a further acceleration in Covid cases
and some political risks as well. The wobble duly arrived, with some notable
profit-taking in the high-profile US companies that have led markets recently.
However, I rounded off by saying that any setback should be manageable and that
there was limited expectation for a broader, deeper sell-off to develop. So
far, so good.
Our Global Investment Strategy
Group (GISG) met again last week and reached much the same conclusion. As a
reminder, GISG sits at the apex of our asset allocation process. It is a
collaboration between the UK and South African arms of the business, and, as
such, we believe, gives us a unique world-view amongst our wealth management
peer group. The role of GISG is to provide guidance as to the amount of risk
investment managers can take in portfolios relative to strategic asset
allocation benchmarks. More practically, it allows us to separate the process
of where and how to deploy our risk budget, making tactical asset allocation a
much cleaner process.
In this commentary John
Wyn-Evans, Investec Wealth & Investment’s Head of Investment Strategy, provides
detail on our current position on Covid, assesses the initial economic recovery
post-lockdown and explains the consequences of falling yields.
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