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Exploiting mean reversion
COVID-19 has caused huge – but temporary – economic and financial market disruption.
Many assets’ valuations and the relationships between them have strayed far from their long-term average or “mean.”
We believe the distortions to asset price valuations will unwind in 2021 as COVID-19 departs.
Amid this “reversion to the mean,” we expect certain areas to be major beneficiaries.
These include certain sectors hit hard by COVID-19, small-cap equities, and some of the most beaten-down national and regional markets.
After the most significant dispersion of asset prices in history, exploiting this mean reversion will be crucial to your portfolio’s return opportunities in 2021.