Through a health lens, clearly COVID-19 is spreading dramatically, and we do not yet have a vaccine or other comprehensive intervention. One of the questions that we have kept at the forefront when evaluating our near-term sentiment is, “Are we post-crisis or still in the first crisis?” Perspectives on that question can profoundly impact one’s outlook.įrom Syntrinsic’s perspective, we remain in the midst of the first crisis through both public health and economic lenses. In addition, an unprecedented amount of fiscal and monetary stimulus is still flowing through the global economy supporting individuals and companies, and potentially masking and/or delaying the effects of the collapse in production, trade, and employment because of the shutdown. While the global pandemic and the resulting shutdown have shifted the narrative, those key themes remain most relevant.Īs we evaluate these near-term themes, we acknowledge that many uncertainties remain as to the breadth and depth of the virus and its implications on the timeline for fully reopening the economy. Near-Term Sentiment Global Macroeconomic ThemesĪt the beginning of 2020, we highlighted global growth, fiscal and monetary policy actions, inflation, sustainability, trade, and geopolitical uncertainty as the key macroeconomic themes for 2020. As disappointing as these revisions are, it is better to be realistic about the markets so that one can allocate accordingly. Only then could growth return to something close to the pre-COVID-19 trend of roughly 1.9% per year global real economic growth. Economists and analysts around the world anticipate that it will take at least a few years to stabilize the global economy. While investment markets and the underlying economy can diverge for months or even a few years, ultimately, the markets reflect real economic growth and interest rates. The pandemic’s anticipated long-term economic impact is so severe that it has lowered the ten-year forecast return for almost all asset classes and market segments. Long-Term Forecast Summary Summary Changes Long-Term Forecast And while private assets can be a valuable portfolio tool for qualified investors, in those spaces, broad asset class forecasts are not as meaningful as strategy-specific characteristics. Outside of real assets, this shift means that we do not see a particularly compelling opportunity in any one asset class relative to the others. As we look across major asset classes, we are now Neutral on equities, fixed income, and hedge fund strategies, while we are Negative on real assets. The pandemic and its economic collateral damage will define the next few years. Our near-term sentiment generally looks at opportunities to more tactically adjust allocations to asset classes and market segments with a three-year perspective in mind.Ī green highlight indicates improvement in sentiment from January to July, while red indicates a reduction in sentiment. The long-term forecast serves as the underlying foundation for our strategic asset allocation efforts, providing a reliable way to anticipate the returns likely available from the different asset classes. Our near-term sentiment also has shifted to highlight the opportunities and risks that have arisen from the global shut-down of economic activity.Īmidst these uncertainties and risks in the marketplace, Syntrinsic remains grounded in our approach to forecasting the investment markets. The anticipated reduction in economic growth, and lower inflation and interest rate expectations leads to lower long-term return forecasts relative to our pre-COVID-19 2020 Capital Markets Forecast published in January. SYN STOCK FORECAST DRIVERSIn addition, we have reassessed our outlook for global growth, trade, fiscal and monetary policy, inflation, and sustainability – key drivers of our near-term sentiment. This sudden and unexpected economic crisis prompted us to revise our long-term return assumptions, mid-year, for the first time in Syntrinsic history.
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