Capital Markets Outlook  |  Q3 2020

Asset Allocations: Continuing underweight to equities

  Current quarter
  Previous quarter
    Change from previous quarter 		Underweight Neutral Overweight
Equity
U.S. large cap
U.S. small cap
U.S. value
U.S. growth
Europe
Japan
Emerging markets
Fixed income
U.S. government
U.S. investment-grade corporates
U.S. mortgage-backed
U.S. floating-rate bank loans
U.S. high yield
Non-U.S. developed country
Emerging markets
Commodities
Cash

Currency views

U.S. dollar versus 		Favor other Neutral Favor dollar
  Euro
  Pound
  Yen

We favor reduced equity risk

We have reduced our dynamic asset allocation risk overall. Despite the Fed’s many programs, we expect the heightened volatility environment to persist, resulting in lower risk-adjusted returns.

We have a very slight preference for high yield

Currently, we have a slight preference for high-yield credit over equity and a very slight underweight to duration. High yield looks more attractive as the Fed has ramped up support for corporate bonds in May and June through investments made by the Secondary Market Corporate Credit Facility.

Overweight to cash, neutral on commodities

There are plenty of risks that still need to be navigated over the balance of 2020.

Stocks are on their feet again, but not ready to run

July 14, 2020  |  Capital Markets Outlook

Despite progress on the virus, we think the markets may stay unsettled and we favor reducing overall risk.

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