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October 2020 / INVESTMENT INSIGHTS

Global Asset Allocation: The View From The UK - October Insights

Discover the latest global market themes

MARKET INSIGHTS

As of 30 September 2020

Mounting Losses

Although unemployment rates have continued to decline, we are starting to see an alarming increase in permanent job losses, which has moved beyond service sectors. While initial hopes were that the impacts of the coronavirus would be short-lived, reality is setting in, and companies whose business models are most vulnerable to changes in consumer behaviour are starting to cut headcount. With additional fiscal support potentially delayed until 2021, hard-hit areas of the economy may face irreparable damage. However, thus far, consumer spending has remained healthy, and bankruptcies, while rising, have remained relatively modest, at least for now. Although signs of progress toward a vaccine have been promising, the likelihood of broad distribution could take many more months, placing further pressure on vulnerable areas of the economy. Without additional stimulus to bridge the gap, we may see a continued increase in job losses, particularly in the service sectors, reaching deeper into the economy and threatening the nascent recovery.

Waves of Uncertainty

After getting through the first surge of coronavirus infections, Europe is now facing a second wave, forcing new restrictions to be imposed in areas that were well into reopening. The UK has been hit particularly hard by the second wave, seeing virus cases creep back up past May levels, reigniting discussions about a national lockdown. The challenges of containing this second wave come at a time when tensions surrounding Brexit are peaking, further complicating the region’s outlook. While the UK officially exited the European Union (EU) last year, the two parties have failed to agree on important remaining issues surrounding trade and security, particularly regarding border checks between Ireland and the UK. With the EU being the largest trading partner of the UK, if an agreement is not in place by the end of the year, it could jeopardise an estimated trillion euros worth of annual trade. As the rest of the world recovers, Europe could be at risk of being left behind if it is not able to overcome these issues.

A November to Remember?

With a quickly approaching US presidential election that is too close to call, mounting controversy surrounding mail-in ballots, the potential for a protracted legal battle and the president’s recent coronavirus diagnosis, markets are increasingly pricing in expectations of higher volatility that could last well beyond election day. Some believe that the potential for political chaos and prolonged uncertainty could be a bigger risk to the markets than the actual selection of either candidate. These fears are made evident by the increasing costs of hedging against volatility postelection through November and December VIX futures. The markets’ reactions to the more than a month of uncertainty during the 2000 election saw the S&P 500 down over 4%, 10-year Treasury yields falling over 50 basis points and gold prices soaring over 12%. If the balance of power remains in flux for a longer period this time around, markets could be more vulnerable given extended valuations, a still tenuous economic recovery and uncertainty around the coronavirus.

For a region-by-region overview, download the PDF.

IMPORTANT INFORMATION

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.

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August 2020 / Asset Allocation Committee

Global Asset Allocation: The View From The UK - August Insights

Global Asset Allocation: The View From The UK - August Insights

Global Asset Allocation: The View From The...

Discover the latest global market themes and the outlook for the world's major regions

By Yoram Lustig

Yoram Lustig Head of Multi-Asset Solutions, EMEA & Latam

July 2020 / Asset Allocation Committee

Global Asset Allocation: The View From The UK - July Insights

Global Asset Allocation: The View From The UK - July Insights

Global Asset Allocation: The View From The...

Discover the latest global market themes and the outlook for the world's major regions

By Yoram Lustig

Yoram Lustig Head of Multi-Asset Solutions, EMEA & Latam

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