Encouraging vaccine news has boosted confidence in Citi’s base case views. The Citi Private Bank Global Investment Committee has further increased overweights to global equities, adding to developed markets (ex US) and emerging markets (ex China).
Despite near-term uncertainties (US election and risk of rising COVID-19 infections in winter), a supportive macroeconomic policy backdrop and better-prepared health sector suggest challenges may not be nearly as severe as COVID-19’s initial global shock. Citi’s Global Investment Committee thus increased its Overweight in Equities, increased its Underweight in Bonds. Gold and REITs remain Overweight while Cash remains Underweight.
Rather than speculate on what may happen up to and after Election Day, investors should prepare their portfolios for positive economic events that are more likely than not to materialize in 2021.
The US election and potential winter COVID-19 surge are unlikely to dominate global returns in the next 12-18 months. Instead, it may be more likely for the eventual departure of COVID-19 to have a profound, mostly positive impact.
Seek balanced core portfolios - Given the current gains in defensive shares, including technology, many portfolios are not balanced. Therefore, rotating portfolios into cyclical shares, small and mid-cap stocks, under-performing markets and more “value-oriented” growth assets makes sense. At the most basic level, investors need to avoid market timing
Citi’s Global Investment Committee remains invested in “Unstoppable Trends” while gradually seeking room in portfolios to add regions and industries that have collapsed under COVID-19 and can potentially recover.
