Investment Outlook Mid-Year Update 2020

Capital Markets Commentary | Investment Outlook Mid-Year Update 2020

In January 2020, Ellwood published its annual Investment Outlook which expressed our asset class views for the year. Ellwood was generally cautious going into the year as the economic cycle indicators we monitor were decelerating. Now as we provide a brief update to our views, we face the considerable challenge of assessing the impact of COVID-19 for the remainder of 2020.

Substantial monetary and fiscal policy stimulus across the globe should mitigate the risk of breaching below the extremely weak economic conditions experienced during the March to May period. However, the troubling increase in COVID cases leads us to doubt the sustainability of a “V-shaped” economic recovery without a widely-available medical solution; we lean more towards a slow recovery in economic activity. Markets will also need to digest the upcoming U.S. election – particularly any perceived change in tax policy.

Relative to our January 2020 publication, we have upgraded our views on international developed markets to neutral as COVID trends in new cases have steadily decelerated. As economic conditions have rebounded off lows, Ellwood has downgraded its view on investment grade fixed income to neutral, with potential consideration for TIPS (Treasury Inflation Protected Securities) as an interesting alternative to nominal Treasury Bonds in an environment where inflation expectations normalize from low levels. Additionally, we have updated our assessment of high yield fixed income, even as spreads have materially tightened from attractive levels in March.

Our views on alternative asset classes are more nuanced. Within hedge funds, private equity and private credit, we see attractive opportunities in a sub-set of credit-oriented and distressed strategies. Within real estate, we anticipate a wide dispersion of COVID’s impact on property types over the short-term and have therefore downgraded our view for the second half of 2020.

Levels of volatility and uncertainty remain elevated, and Ellwood will continue to process new information to determine if material modifications in our views are necessary.

Asset Class Outlook

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Important Disclosures

The information provided herein is for informational use only and not to be construed as investment advice. Any opinions herein reflect our judgment as of this date and are subject to change. In no way should the information herein be construed as personal recommendations as it does not take into account the particular investment objectives, financial situations, or needs of individual users.

The information presented is not an offer to buy or sell securities, nor should it be construed as tax or legal advice. The historical information included herein is historical only and is not a guarantee of future performance.

Ellwood obtains information from multiple sources believed to be reliable as of the date of publication; Ellwood, however, makes no representations as to the accuracy or completeness of such third party information. Ellwood has no obligation to update, modify or amend this information or to otherwise notify a reader thereof in the event that any such information becomes outdated, inaccurate, or incomplete. Included in this report are various indices information. All indices are unmanaged and not available for direct investment. Index returns are shown gross of investment management expenses.

Investments in securities are subject to investment risk, including possible loss of principal.

Bonds are subject to interest rate, price, and credit risks. Generally when interest rates rise, bond prices fall.

Investments in commodities may have greater volatility than investments in traditional securities.

Investments in emerging markets may be less liquid and more volatile. Additional risks include currency fluctuations, and political instability.

Equity investments are more volatile than bonds and subject to greater risks. Small- and mid-cap stocks involve greater risk than large-cap stocks.

High-yield fixed income securities are subject to liquidity and credit risk, and tend to be more volatile than investment grade fixed income.


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