BCA Weekly Commentary 10/02/20: De-risking on Uncertainty
SUMMARY. Political uncertainty was the focus last week as the election nears. That uncertainty was magnified by the President's contraction of Covid-19 and post Presidential debate discussion. With many factors favoring a Biden victory at this point the direction of markets is even more uncertain as the prospects of a tax & spend administration may cause anemic growth and marginally higher interest rates over the next years to come. These factors may mitigate the positive release of vaccines in coming months and reopening of the economy.
INVESTMENT IMPACT. This week we reduced our exposure to equities overall especially in Brazil tied to the above and specific fiscal constraints in Brazil itself tied to its high level of sovereign debt. Although we believe much of the uncertainty of this is factored in we shifted assets to areas that may benefit under a Biden administration. Specifically, in health care (less pressure on drug prices) and China (lower tensions on trade). The positions added remain small, but are hedges against slower than anticipated growth in the US in 2021 than we expect and around the Globe. Despite these changes we remain positioned for the value segment of markets (stocks tied to reopening such as retailers, banks etc) to normalize valuations with growth sector in 2021 and avoidance of technology segment.
Our model portfolio performance has been updated on our website as of 9/04/20.
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