Three Reasons for Optimism Despite Market Uncertainty

Sébastien Page, CFA, Head of Global Multi-Asset and CIO


These are really difficult times to make asset allocation decisions. We’ve just had the worst data for unemployment claims in history, and it’s forecasted that this year we’ll lose more in terms of GDP than we did throughout the entire financial crisis of 2008 and 2009. So I wanted to put these numbers in context and offer some balance – Three reasons to be optimistic. Because it’s difficult nowadays to be optimistic.

First, we will get through this. It’ going to take a long time. But we seem to have reached a point in the pandemic where things have stopped getting worse, and if you look at the jobless claims, at least 80% of them are already classified as temporary. And also a lot of them are in the service sector, and typically those jobs are easier to put back on line than for other sectors of the economy.

Second, we’ve had a tremendous amount of stimulus, representing about $10 trillion globally between monetary and fiscal measures. Authorities have learned from the 2008/2009 crisis. One of our portfolio managers in our multi-asset division put it this way, “You’re looking at some of the worst economic data ever against the biggest set of stimulus measures ever. And if you don’t like to fight the Fed, it’s hard to get bearish here.”

Third, it doesn’t feel like it because equity markets have rallied from the bottom, but expectations are actually quite low at the moment. There’s a lot of pessimism. Earnings forecasts are dropping like a stone. GDP forecasts are dire. Investor confidence, close to an all-time low. And there is a lot of cash on the sidelines if you look at the assets under management in money market funds, for example. So when expectations are that low, there is room for positive surprises that can sustain risk assets even though it doesn’t feel like it.

So what does it mean for investors, in particular those concerned with asset allocation decisions.

Now’s the time to remain diversified and invested for the long run. And for those who are fairly far from retirement, it means a healthy allocation to risk assets and stocks in particular.

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