Weekly Bulletin – CARLTON SMITH

Weekly Bulletin: Upholding Equity Views

May 18, 2020Carlton Smith Financial Planning

Global stocks have recovered more than half of the selloff triggered by the coronavirus pandemic since late March – alongside a sharp contraction in economic activity and corporate earnings. We see the unprecedented policy response to cushion the pandemic’s blow as key to support global equity markets – against a backdrop of historic uncertainty for activity and earnings. We still prefer an up-in-quality stance and like economies with ample policy room as we stay neutral on global equities overall.

Key points

Revisiting Equity Views: We favour up-in-quality equity exposures across regions and style factors even as we stay neutral on global equities overall.
Key to Policy Response: The key to the policy response has shifted to ensuring successful execution and avoiding policy fatigue before the shock passes.
China in Focus: Markets will focus on the delayed annual meeting of China’s top legislature, with expectations for more virus relief measures.

The opinions expressed are as of May 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.

Weekly Bulletin: Gauging The Virus Shock

April 27, 2020April 27, 2020Carlton Smith Financial Planning

Global economic activity is being frozen to stem the coronavirus pandemic. Yet implications for asset prices will depend on the cumulative impact of the growth shortfall over time. We believe that policy actions to cushion the impact of virus shock are nothing short of a revolution. Execution is a risk, but if successful, the cumulative impact of the virus should be well below that seen in the wake of the 2008 global financial crisis (GFC) — despite the historic scale of the initial shock.

Key points

Not a Repeat of 2008: The overwhelming policy response to cushion the coronavirus shock is set to prevent a repeat of the 2008 financial crisis, but execution is key.
Oil Slump: Oil prices slumped to historic levels, as a huge demand shortfall has squeezed the limited storage capacity.
Data Watch: This week’s US consumer confidence data will shed light on how much impact the containment measures have hit consumer spending.

The opinions expressed are as of April 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.

Weekly Bulletin: Upgrading Credit

April 6, 2020April 6, 2020Carlton Smith Financial Planning

Unprecedented policy actions to limit the coronavirus shock and sharply lower valuations have improved the outlook for credit, in our view. Major central banks are committed to keep rates low and greatly expand their balance sheets. This underpins demand for corporate bonds and selected sovereign credit. We upgrade our view on global investment grade credit to a moderate overweight from underweight and keep high yield as an overweight.

Key points

Policy & Valuations: We upgrade our tactical views on credit on extraordinary central bank support and substantially more attractive valuations.
Stalling Rally: The initial market rally from historic US policy actions has stalled as worsening economic data and a rising human toll dominate sentiment.
Data Watch: Jobless claims and consumer sentiment data this week are likely to show more signs of economic damage caused by the coronavirus.

The opinions expressed are as of April 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.

Weekly Bulletin: A Shift to Sustainable Investing

April 1, 2020Carlton Smith Financial Planning

It’s important to keep a long-term perspective amid market volatility – such as the extraordinary moves of recent weeks. One enduring trend we see is a move to sustainable investing: a structural shift in investor preferences leading to large and persistent flows into assets perceived as more resilient to sustainability-related risks such as climate change. Investors rebalancing portfolios after the risk asset selloff may consider leaning into sustainable assets.

Key points

Long-term trend: Investors should keep a long-term perspective amid market volatility, including a focus on portfolio resilience through sustainable investing.
Policy action: Historic US policy actions, including over $2 trillion in fiscal support and a raft of Federal Reserve measures, helped calm markets.
Data watch: This week’s data are likely to show further signs of economic damage caused by the coronavirus outbreak and containment measures.

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.

Weekly Bulletin: A Rebalancing Act

March 23, 2020March 23, 2020Carlton Smith Financial Planning

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.