The preparation for the November 3 presidential election, new national lockdowns in Europe’s largest economies and record daily coronavirus infections in the United States have sparked the worst sell-off in global equities in months. Almost $ 2 trillion in value was wiped out on Wednesday alone.
Since the start of the pandemic, fund managers with more than $ 4 trillion in assets under management that Reuters regularly polls have cited the second wave of infections currently underway as a major risk and have remained cautious throughout. of the year.
In line with this strategy, the October 15-29 survey of 33 wealth managers and investment managers in Japan, Continental Europe, Great Britain and the United States showed that recommended bond holdings increased by more than 5 percentage points since January this year to reach 45.5% on average. month.
That’s an increase from 44.7% the month before, already the highest since a comparable poll began more than ten years ago.
At the same time, the overall equity exposure of the Global Balanced Models portfolio fell further in October to an average of 41.4% from 42.7% in September, the lowest since early 2010.
This average has plunged more than 8 percentage points since the start of the year.
“There aren’t many reasons we’re bullish on stocks. All of the upcoming events clearly point to more pain for the stock markets,” said an investment director at a large fund management company. American. “There is a high risk to the already fragile economic recovery from the resurgence of the COVID-19 pandemic,” he said.
“Forget about a V-shaped recovery, the W-shaped scenario for the world’s major economies has become the market consensus.”
This echoes the findings of a separate Reuters poll of around 500 economists who saw the new wave of coronavirus cases pose a high risk of halting the current global economic recovery as early as this year.
In the latest survey, fund managers again picked the pandemic as their top risk in response to an additional question.
“The shares have incorporated the price of a COVID-19 vaccine later this year, but if this is significantly delayed, has low clinical efficacy or has significant side effects, we could see a substantial market correction,” said Benjamin Suess, Director of UBS Asset Management in Zurich.
But more than half of the 21 fund managers, who answered a question about the main driver of the stock market, said further fiscal stimulus in the United States would be the main driver for the rest of the year, many anticipating a stock opportunity if it passes.
“You can see the outcome of the US election as a trigger for the markets rather than a driver,” said Craig Hoyda, senior quantitative analyst at Aberdeen Standard Investments in Edinburgh. “Once the outcome is certain, the markets – in their role as discounting mechanisms over time – will assess the expected trajectory of fiscal policy.”
Still, 18 of 21 fund managers who answered a question about the potential impact of a delayed or controversial US election result, said it would lead to a sell-off immediately afterwards.
“Anything is still possible if the result is close. The US stimulus negotiations would become even more delicate if there was an uncertain election result and would plunge the markets back into the kind of chaos endured earlier this year,” added the manager of global fund based in the United States. .
A massive sell off in March wiped out a third of the value of U.S. stock indexes as the pandemic hit markets and locked economies.
Now, less than a week before the US presidential vote, a resurgence of COVID-19 cases is bringing new brakes and nervousness to financial markets.
(Report and poll by Rahul Karunakar and Tushar Goenka in BENGALURU and Fumika Inoue in TOKYO; edited by Ross Finley and Tomasz Janowski)
By Rahul Karunakar and Tushar Goenka