Weekly multi-asset desk views

Weekly Review: 4 September 2020

Weekly Mag updates


  • Economic data releases pose some questions on recovery momentum from here
  • COVID virus dynamics suggest 2nd waves may be less economically disruptive

Market and economic review

Risk assets demonstrated choppy price action over the week, with early gains given back as markets were led lower by tech stocks.

The week started well with the US Institute for Supply Management (ISM) Manufacturing index rising to 56.0 from 54.2 and the New Orders sub-component rising from 61.5 to 67.6 (these surveys measure the change in activity vs previous month with 50 being the divider between expansion and contraction).  We also got the final readings of equivalent surveys for the Eurozone where the Composite reading came in pretty much in line with the flash estimate at 51.9. This was a step down from July’s 54.9 reading, pointing to a moderation in the pace of recovery following the pent-up demand seen as economies re-opened.  Indeed, details in the US ISM for the Service sector released later in the week played to this.  While the headline reading came in at 56.9 versus prior 58.1, the New Order sub-component (regarded as a leading indicator) showed a 10pt fall to 56.8; the Employment sub-component improved but remained subdued at 47.9.  Questions on whether the momentum of the recovery can be sustained may have been one of the contributing factors behind the equity market correction seen on Thursday. 

Non-Farm Payrolls data on Friday pointed to gains of 1,371k over the month, a slight beat vs 1,350k expected, but lower than gains seen in the previous 2 months.  US Continuing Jobless Claims declined to 13.2m in August, down from a peak of c25m seen in May, but there is still some way to go to get down to pre-COVID levels of c1.7m.  Perhaps reflecting that some Federal Reserve Board speakers mentioned the need for continued fiscal support to aid the recovery. Meanwhile, Congress wrangles over a new package to replace what has expired, with key employment benefits having only been temporarily extended at lower levels.

COVID-19 virus dynamics suggest 2nd wave less deadly; some positive news-flow on vaccine development

Global cases continued to grow reaching 26.3m according to Bloomberg. We have seen flare-ups or 2nd waves in Europe, parts of the US and elsewhere, but so far at least they appear to be much less deadly. There could be a number of reasons for this – including much more extensive testing and infections being concentrated in younger people who have been more active post lock-down.  For now, political leaders appear to believe these episodes can be managed by local measures rather than reintroducing widespread lockdowns.  This suggests that the risk of major economic disruption from 2nd waves may be less than had been feared.  Meanwhile efforts to find a vaccine continue with 7 drugs in final phase 3 development and suggestions that some may be available in the autumn for emergency use.  Indeed, it was reported that the US Centers for Disease Control and Prevention told state health officials to be ready to distribute a vaccine by November 1st.  That said, the common flu vaccine is <50% effective and no coronavirus vaccine has ever been tested or used at scale.

US dollar strengths and government bond yields ease down

One of the trends in markets over recent months has been the weakening US dollar, which is generally helpful for risk assets.  Active market positioning looks most pronounced in long Euro vs US$ with that pair briefly reaching 1.20 for the first time since 2018.  This led to comments from some European Central Bank (ECB) members suggesting that continued strengthening of the Euro could become a policy issue if it weighed against inflation and recovery.  This may be one of the reasons for the reversal later in the week.  It was notable that headline inflation for the Eurozone came in at -0.2% YoY vs prior month reading of +0.4%.  Our analysis suggests that to a large extent this was driven by COVID-19 disruption pushing summer sales typically seen in July into the month of August.  Staying in Europe, France announced a further €100bn recovery plan to support vulnerable sectors of the economy – another indication of policy makers’ concern over the growth outlook and determination to foster a recovery.

August saw a move up in bond yields and some curve steepening which faded last week.  US 10y Treasury yields moved back down to 67bps (at the time of writing) which is towards the lower end of the 60-80bps range seen since Q1, and some of the curve steepening we saw in August was reversed.  A key element of central bank policy is likely to remain anchoring bond yields, at least out to 10 years, to support the recovery and help deficit financing.


Markets will focus on central bank policy meetings next week in what remains one of the most uncertain environments for many years.  The Bank of Canada makes its latest decision on Wednesday, before the ECB follows on Thursday, ahead of the Federal Reserve the week after that. Brexit negotiations between the UK and the EU will resume as they move closer to the year-end deadline when the transition period concludes.  Markets will also continue to closely watch COVID-19 virus dynamics and vaccine developments.


Important information

5-year performance record to 30 September 2020

  Calendar year returns   12-month rolling returns  
  2019 2018 2017 2016 2015   2019-2020  2018-2019  2017-2018 2016-2017 2015-2016 Currency
Insight's broad opportunities strategy (pooled) (GBP) 13.13 -4.99 10.13 5.05 -1.19   -3.60 5.80 2.18 6.82 5.45 GBP
3-month GBP LIBID 0.68 0.60 0.23 0.38 0.45   0.36 0.70 0.50 0.21 0.42  

Please refer to the following risk disclosures. 
Returns are shown gross of fees. Returns are shown for the Insight Broad Opportunities Fund (share class S GBP, inception 29 February 2012) and the Insight Broad Opportunities Strategy (inception 31 Dec 2004).


Past performance is not indicative of future results. Investment in any strategy involves a risk of loss which may partly be due to exchange rate fluctuations.

The performance results shown, whether net or gross of investment management fees, reflect the reinvestment of dividends and/or income and other earnings. Any gross of fees performance does not include fees and charges and these can have a material detrimental effect on the performance of an investment.

Any target performance aims are not a guarantee, may not be achieved and a capital loss may occur. Strategies which have a higher performance aim generally take more risk to achieve this and so have a greater potential for the returns to be significantly different than expected. Portfolio holdings are subject to change, for information only and are not investment recommendations.



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