Pandemien er langt fra overstået på grund af Delta-varianten og den langsomme vaccinationsproces i de nye økonomier, og derfor tager den økonomiske genopretning også mere tid end ventet, skriver Citi. Men banken betegner udviklingen som skuffende og ikke som chokerende. Det betyder, at centralbankerne vil være mere forsigtige med at sætte renterne i vejret. Citi undervægter fortsat obligationer i sin porteføljeanbefaling, og banken anbefaler investering i selskaber, der giver en høj dividende for at minimere risikoen ved kursfald.
Unfinished Pandemic, Unfinished Recovery
Recent news suggests a coming surge of delta COVID-19 in highly vaccinated economies. This may set back the time frame for global reopening into 2022. For the world economy and markets, Citi analysts characterize the likely impact as “disappointment” rather than “shock”.
Authorities will manage the virus with widely different approaches in each country and region. It may lengthen the duration of COVID-19 distortions to sectors, lengthening the depression of international travel. Notably, the spread of the delta variant in India was extremely rapid and so was its retreat, largely over two months’ time. The most effective vaccinations might only slow the spread, but they do greatly reduce the severity of health impacts.
The world economy is not positioned in the same way when it was shocked with the unknown in 1Q 2020. Excess demand for goods and some services is draining limited supplies. This is not the backdrop for a contraction in industrial production, trade and employment overall.
While the global economic recovery may proceed and co-exist with COVID-19, asset prices are elevated relative to when the pandemic first hit. Until the world sees full, effective vaccinations or “herd immunity,” the likely new global COVID-19 surge could promote dispersion of asset prices and dampen “mean reversion.” It has already dropped Fed tightening expectations by 40 basis points, spurring a rally in long-term safe haven bonds.
Like all other past health crises, COVID-19 is not unstoppable. However, the longer it persists, the greater “inertia” could build to create lasting impact. A COVID-19 setback may lengthen the period of unusually accommodative monetary policy. When the Fed ultimately raises interest rates, it may be at least marginally later in the economic expansion. This poses somewhat greater risk, and is itself a reason why long-duration, high quality bond yields could rise less than previously assumed.
Past performance is no guarantee of future results. Real results will vary.
Bond valuations are still unappealing for reallocation, with US real yields falling back to a cycle low -1%. Citi analysts remain neutral US bonds with 10-year US Treasuries roughly equal to the global average yield. This includes sub-investment grade debt and many other low-quality sovereign borrowers. Citi analysts continue to underweight bonds and cash in Europe and Japan.
With previous views of the maturation of the market recovery, Citi analysts reduced allocations to Brazil and Global REITs, reinvesting in US large caps and China shares. Citi analysts also prefer global dividend growth strategies to raise portfolio quality and reduce risk within equities.
