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Investment strategy
November 22, 2020
4 mins

D-Day - the arrival of vaccines

November 22, 2020
4 mins
David Bailin
Chief Investment Officer
Steven Wieting
CHIEF INVESTMENT STRATEGIST AND CHIEF ECONOMIST
COVID vaccine vial
SUMMARY

The arrival of vaccines marks the “D-Day landings” in the war against COVID-19. Investors should position their portfolios ahead of victory over the virus.


Like armies landing on five Normandy beaches on D-Day (Utah, Omaha, Gold, Juno and Sword), the arrival of the five initial vaccines (Pfizer, Moderna, AstraZeneca, Johnson & Johnson and Novavax) will mark the beginning of the end of Covid-19. There are now five billion incoming “landing craft” that are likely to return the world to a new normal and the full start of a New Economic Cycle in 2021

Given that the vaccine manufacturers presumed success and planned for the delivery of billions of doses, it is likely that we will see the end of the global Covid-19 pandemic around mid-year 2021, with a sharp broadening out of the world economic recovery in the second half of 2021.  Our view is that the sources of fuel for the industrial, services and trade recovery we are about to experience are larger than investors expect.

Markets anticipate events and so must we.  When you’re in the business of managing assets, the decision to “go overweight” risk assets is one the CIO looks back on to study their success or failure.  This past week, the Citi Private Bank Global Investment Committee (GIC) raised its allocation to global equities by a further 3%. With the changes, CPB is 9.5% overweight global equities, including a 2% overweight to REIT assets. We also remain 1.5% overweight to gold as a risk hedge, while our global fixed income weightings were reduced from -7% to -10%.

Though we have pivoted portfolios to cyclical shares and underperforming non-US markets, we are not expecting a fundamental retrenchment in the “digital economy.”  The equity markets we are overweight are collectively 14% below record highs, with only the US small and mid-caps sectors having rebounded to new highs so. Even a partial recovery in assets we are overweight, such as REITS, could generate double-digit returns from current levels. Our preferred markets across Europe and in Southern Asia will be major beneficiaries of a return to trade normalcy under a Biden administration.  And these equity markets are big laggards relative to China.

If you are a Citi Private Bank client you can check the value of your portfolio by reviewing your monthly statements or, if you use Citi Private Bank In View, by navigating to the Account Overview page via Portfolio → Overview. If you have any queries please contact your usual Citi Private Bank representative.

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