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Markets typically perform well after US election

The Covid-19 crisis has recently worsened, particularly in Europe. In Asia, and above all in China, the situation looks much better. In the third quarter, the second-largest economy grew by 4.9 percent year on year. At the same time, Joe Biden was able to improve in the election polls over the last two months, even if his lead over Trump has recently declined slightly. One of the beneficiaries of this development were emerging market equities, which significantly outperformed developed market equities in the last four weeks, also driven by increased fund inflows. On the surface, not much has…

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Seasonality - best period for equities is just around the corner

October has so far been much better than September; and the second half of October is even more positive for stock markets, at least historically speaking.

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Return potential despite volatility

Volatility on the stock markets remains high. In September, the VIX volatility index for US equities remained above 25%. Looking ahead, the important developments are the US presidential election, vaccine news and the Q3 reporting season, which has already begun.

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Probability of rapid, broad vaccine availability slightly reduced

The volatility of equities has recently increased. The US Federal Reserve is maintaining its position and points out that fiscal policy should now provide impetus for the US economy. However, Democrats and Republicans cannot agree on a further stimulus package. A compromise before the US elections now seems increasingly unlikely. The so-called ‘superforecasters’ put the probability of a deal before the elections at less than 20%. In addition, they have moved their forecasts for a rapid vaccine approval and distribution slightly into the future. This, together with the increased COVID-19…

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Capital Markets Outlook by Berenberg’s Wealth and Asset Management

Compact outlook on capital markets, the economy, equities, bonds, commodities and currencies.

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Q4 2020 │Vaccination hopes

If a coronavirus vaccine is approved, a globally synchronised recovery will probably become the dominant theme for capital markets.

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Volatility has increased In August, especially for the Nasdaq

We consider the recent correction in the overheated and in part ambitiously valued US technology sector to be healthy. In addition to some profit-taking after the strong rally, the options market bore some responsibility for this. With their call bets on rising prices, US private investors forced market makers to hedge against further rising markets in the form of stock purchases, which intensified the upward pressure and led to increased volatility. When the reversal occurred, these hedges were reduced and the feedback loop had a strengthening effect on the downward movement. We believe the…

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Breather and rotation

The recovery of the stock markets has taken a breather – the summer was lacklustre, as we expected. While in the last few

weeks there was initially a clear upward trend at first, there has recently been a significant setback.

 

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Capital Markets Outlook by Berenberg’s Wealth and Asset Management


The golden age continues

“Towards gold throng all, to gold cling all, yes all” – after a rise of 20% in euros, this Goethe quote seems to be proving true again. Gold is one of the bestperforming assets this year. In view of the significant economic uncertainty causedby the coronavirus, this is hardly surprising. A look beneath the surface, however, reveals further reasons for this record run. Although stock markets have been recovering rapidly since mid-March, gold continued to surge. But how much more

can it rise? Is it still worth adding gold to your portfolio?

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US-Megacaps are the dominat performance driver on the S&P 500

Stock markets - above all the US megacaps and cyclicals - have continued to rise over the last two weeks. The Nasdaq, which we described as a "safe haven" at the beginning of February, has seen a return of almost 30% since the beginning of the

year. Their high cash flow generation, strong balance sheets and share buyback programs provide a supportive effect. In some tech segments, however, a great deal (of hope) has already been priced in, so we currently feel more comfortable with

European small caps and cyclical companies. The probability that a Coivd-19 vaccine will be approved in the…

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Relative attractiveness of silver versus gold has normalised

The summer remains lacklustre. Over the past four weeks, not only have European stock markets stagnated. Below the surface, however, cyclicals and especially small caps have outperformed more defensive stocks. Positive economic surprises and hopes for a coronavirus vaccine also provided support, as did the continuing scepticism

and cautious positioning of many market participants. Speculative investors, for example, have reduced their equity positioning in futures over the past few weeks. Positions in corporate and emerging market bonds benefitted from a further

narrowing of risk premiums.…

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Trend towards sustainable investment

So far, the trend towards sustainable investment has been focused primarily on equity markets. Many market participants have attributed greater importance to the analysis of environmental, social and governance (ESG) criteria in equities due to the higher perceived influence and potential share price impact.

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The recovery is underway

The recovery rally on the stock markets has continued at a slower pace over the past four weeks. US equities in particular have gained ground.

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Options markets are also increasingly positioned pro euro

The lackluster summer has already begun. While equity markets rose in the first three weeks of July, partly thanks to a better-than-expected Q2 reporting season, last week brought a correction - particularly in Europe. However, the major US technology stocks continued to rise thanks to good quarterly figures. Political uncertainty remains high, the positive economic surprises of recent months are likely to fade and a renewed lockdown due to a second wave of corona would be fatal for the global economy. Moreover, the August-September period is often weak for equities. Positive drivers would be…

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Capital Markets Outlook by Berenberg's Wealth and Asset Management

Compact outlook on capital markets, the economy, equities, bonds, commodities and currencies. New every month.

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US consumer spending has stagnated recently

Over the past few weeks, cyclical assets such as industrial metals and the Dax have outperformed the market, in line with a series of better than expected economic data The stabilisation of earnings estimates recently and the better-than-expected Q2 reporting season so far have also supported equity markets. In absolute terms, however, Q2 results look poor compared to the previous year. The S&P 500 is expected to see earnings plunge by more than 40% y/y. The low equity positioning of many market participants, the predominantly pessimistic investor sentiment and globally low interest rates…

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The upturn has started

Stock markets are again approaching their interim highs of early June, driven by vaccine hopes and positive economic surprises.

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The trend for economic surprises is upwards

European stock markets are again approaching their temporary highs of early June, driven by vaccine hopes and positive economic surprises. In absence of an unanticipated exogenous shock, we believe downside potential remains limited. Investor

sentiment is still not euphoric, most brokers are cautious in the short term and investor positioning remains muted. A lot of money is parked on the sidelines, which is gradually being put back into play. Money market funds, for example, have

recently recorded the largest outflows since December 2019, and money supply growth fuelled by central banks is…

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Q3 2020 | Recovery

An appreciable recovery from the deepest recession since the 1930s began in May, supported by aggressive monetary and fiscal policy.

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Capital Markets Outlook by Berenberg’s Wealth and Asset Management

Compact outlook on capital markets, the economy, equities, bonds, commodities and currencies. New every month.

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Investors expect high volatility until after the us elections

The last two weeks have shown that volatility remains high and is unlikely to fall back to pre-crisis levels any time soon. With the upcoming reporting season, continuing geopolitical and trade uncertainties, the ongoing corona crisis and the US

presidential election due in early November, there are a lot of stumbling blocks ahead. At the same time, the market is supported by the fact that many bears remain underinvested in equities, in addition to the support from central banks. Further,

economic data have tended to surprise upwards recently. In addition to all the downside risks, there are…

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Europe has catch-up potential if the global economy picks up

Underinvested investors continue to suffer. The "pain trade" to the upside has continued. In particular, regions and sectors that had previously underperformed have gained. Cyclicals were the relative winners. The DAX rose strongly and the US dollar depreciated. This was in part due to: substantial fiscal stimuli in the eurozone and Germany, the continued support of the ECB, and systematic investment strategies that rely on momentum which have further increased their equity exposure. Many discretionary asset managers increased their equity positions after exceeding the important 200-day lines…

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Capital Markets Outlook by Berenberg’s Wealth and Asset Management

Compact outlook on capital markets, the economy, equities, bonds, commodities and currencies. New every month.

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Silver steps out of the shadow of gold

Despite increasing risks, stock markets remain stable. Coronavirus is still spreading and the global economy is expected to recover modestly. A Brexit deal seems difficult at the moment, the risk of a "cold war" between the US and China is increasing and the US presidential elections in November will provide additional uncertainty. However, investors seem to be looking further ahead and are driving valuations to levels not seen since the tech bubble. Positioning is extremely concentrated. Growth, technology and pharmaceutical stocks as well as defensive investments are in demand. Investor…

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