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Investment Monthly - May 2020

Despite markets rebounding and risk appetite improving thanks to policy action, economic activity and corporate profitability have fallen sharply.
01 May 2020
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    Key takeaways:

    • Investment markets have rebounded as a slowdown in the number of new COVID-19 cases has created the perception that the virus is “under control”
    • Risk appetite has also been boosted by aggressive policy actions from central banks and governments around the world, which reduce the probability of very bad outcomes. Nevertheless, economic activity and corporate profitability has fallen sharply, and it is expected they deteriorate further
    • Meanwhile, in our view relative valuations for risky asset classes continue to look attractive. Global equities and high yield bonds seem to us to be good places to deploy risk
    • Exposure to emerging market (EM) asset classes could become a bit tricky from here. Relative valuations versus developed markets (DMs) have narrowed and EM economies face many challenges to manage the health and economic crises. The bright spot is Asia as it can benefit form a growth recovery in China