The announcement of two vaccines against COVID-19 that were highly effective in clinical trials drove a risk-on mood in financial markets and injected additional fuel into the post-election rally. Overall, the MSCI World index was up 11.3% in Q4 2020 so far.

Across the globe, central bankers kept their printing presses busy in Q4 2020. Since COVID-19 and its implications for the world economy will cast shadows for some time to come, we see hardly any evidence that the flood of cheap money might abate in the coming quarters.

Despite the victory of Joseph Biden in the US presidential elections, we expect Washington to be under well-balanced political leadership for some time. Thus, investors are better off not pricing in a mind-blowing stimulus package for the months to come since Republicans will keep a close eye on budget discipline.

While the global economic recovery has been proceeding at a solid pace during the most recent quarter, some signs are slowing down. We believe that the US economy is prone to a slight consolidation in Q4 2020 before it is expected to resume its robust growth trend in early 2021.

We believe that global equities still offer a compelling opportunity set. During the most recent quarter, we increased our exposure towards cyclical stock markets, especially the Eurozone. From a tactical perspective, we nevertheless see some dark clouds building up in equity markets.

Overall, we recommend that investors retain a very cautious attitude toward fixed-income paper. Nevertheless, we still see some opportunities in Emerging Markets bonds where rather supportive fundamentals and supportive valuations have still not synched up again.