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.

Download exploiting mean reversion summary report

Findings & Opportunities

Outlook 2021 Findings & Opportunities summary brochure is available in five languages

Outlook 2021 themes

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Fixed income
We believe positive real returns from fixed income remain achievable for properly diversified portfolios within this asset class.
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Capital markets
Equity volatility has been structurally higher than before the pandemic. Certain capital markets strategies enable this to be converted into a valuable source of income.
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Alternatives
Amid repressive conditions, we believe that qualified investors should consider taking less traveled paths to fixed income yield via alternative strategies.
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Equities
Negative real interest rates have increased the importance of dividends in income-seeking portfolios.

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Outlook is created by a team of individuals with a depth of experience from across the Private Bank.

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