Weekly Bulletin: A Rebalancing Act

Drastic market moves in recent weeks – triggered by fears of the coronavirus outbreak and its economic toll – have likely thrown many portfolios off their broad asset class benchmark weights. Sharp equity sell-offs and government bond yield declines have mechanically turned many portfolios underweight equities and overweight bonds. We favour rebalancing toward benchmark weights, but recognize that timing and implementation will vary by investor.

Key points

  • Off benchmarks: Recent sharp market moves may have pushed many portfolios off their strategic allocations. We see room to rebalance toward benchmarks.
  • Policy action: Fiscal and monetary policy action to bridge the impact of the coronavirus is starting to take shape – and may be underappreciated.
  • More cooperation needed: A virtual summit by the Group of 20 economies could signal more concrete policy cooperation needed to deal with the virus shock.

The opinions expressed are as of March 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.