The global re-opening
As most developed countries are on track to re-open parts of their economy this month and ease significantly further in July, and Asian economies like China and South Korea operate at almost full capacity, we are receiving initial signs that the global economy is recovering. Most of the European and Developed Asian countries have reduced the spread of the virus significantly, and although the United States is struggling to contain and reduce the spread of the virus in big states like California, Texas and Florida, other major states within the US have proved to be successful in containing the spread of the virus.
Risks still exist
Major problems regarding the spread of the virus continue to exist in emerging market economies, particularly India and Latin America. There are risks of a second wave, however, it remains difficult to judge whether (if it occurs) a second wave will be violent or mild.
Greater understanding
An important point to note is that it is practically every government’s number one priority to contain the virus and balance the risk of a second wave with re-opening the economy. Governments now also have a greater understanding of the virus and how to utilise resources to be able to contain it.
How have we been positioned?
Share prices have recovered significantly in some sectors such as Technology and Healthcare since March. Other sectors, particularly outside of the United States, such as Financial Services, Industrials, and Energy have not seen the same recovery. Our investment portfolios have been positioned with a bias in the United States, in Technology, Healthcare, and Consumer Staples since late March/April.
What are we doing now?
We are now starting to shift some of our allocations in the US, Technology, Healthcare, and Consumer Staples sectors into other sectors where we believe a greater upside to market prices remains.
Within the Commercial Property sector, we remain invested, however, we are now slowly shifting our allocation from Commercial Property within the Office and Retail sectors to Warehouse and Logistics properties. This shift reflects a longer-term shift occurring within Commercial Property driven by online shopping.
Remaining flexible and diversified
We remain diversified during this volatile time and have room to increase our allocation to risk assets (shares/equities) if markets pull back or we believe market price can rise higher from here. We are monitoring the situation closely to seek out long term investment opportunities and managing our risk appropriately.
