Global Factor Views
- 15 December 2020 (7 min read)
Macroeconomic and equity market backdrop
- Near-term vaccine euphoria: Vaccine announcements by a number of drug companies in November led to a classic relief rally, with a rotation away from stocks with high earnings quality (which had led the market rally since its March low) and into lower quality and deep value stocks. The best performing areas of the market were those that have been most impacted by lockdowns (travel, hospitality and retail) as investors swiftly priced in a better outlook for earnings. The rotation from ‘high quality-low risk’ to ‘low quality-high risk’ witnessed in November was the largest since the recovery from the financial crisis low in March 2009.
- Economic headwinds persist: The road to global recovery from the pandemic will take time. Infection rates remain high in the US and Europe, and ongoing restrictions and lockdowns continue to supress economic activity. Given the time required for an immunisation programme, we do not expect the good news on a vaccine to alter the trajectory of GDP growth in most developed nations before mid-2021.
- Stimulus and market leadership: We expect central banks to maintain easy monetary policy for the foreseeable future. However, as we move through 2021 and into 2022, the role of fiscal stimulus should shift from recession mitigation to growth generation across a broad range of economic segments. Such an environment should improve equity market breadth, supporting a wider group of stocks and investment styles than in 2020, where returns have been dominated by a narrow band of mega cap growth stocks.
With the above macro and market conditions as context, we update our outlook for equity market factors below.
Outlook for equity factors
Source: Rosenberg Equities, 9 December 2020. The views expressed above are as of the date of this document. No guarantee or warranty is made regarding the outlook above. Investors should not base their investment decisions on the commentary provided and should consult their advisers before doing so.
Source: Rosenberg Equities. Factor returns data presented as of December 7th 2020. The chart plots univariate factor returns calculated by Rosenberg Equities based on MSCI World investment universe. The data are shown for illustrative purposes only and are not based on actual portfolio returns. Past performance is not a guide to future performance.
Not for Retail distribution
This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.
All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
Risk Warning
The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.