It has been said that Wall Street is very good at creating explanations for what has happened in the past, but is not very good at predicting the future! With that thought in mind, I listened to a webinar sponsored by Wellington Management Co where they discussed their outlook over the 6 - 12 month horizon published in their write-up titled Politics, Policy and the Pandemic (click link for more info).
In summary, the authors state that there are three main factors leading the way. First, even though there have been some bumps along the road, we are moving in the right direction regarding COVID-19. Treatments and vaccines are moving forward and there is reason to view this as a positive trend. Secondly, there has been strong fiscal and monetary support to bridge the economy over this crisis and more is hopefully coming. And thirdly, economies are opening slowly and there does not seem to be a prospect for another shutdown.
So, the writers are cautiously bullish with a positive tilt to their outlook. Where are they placing their bets?
U.S. equities are a place to overweight your portfolio, they say. The view is that the U.S is in a better position than other economies around the globe and tends to be less cyclical. Also, interest rates are very low and are likely to stay low for a while. So, a good investment thesis for stocks, but not for bonds; best to buy bonds with some credit spread to earn something and be compensated for the risk. Finally, though the consensus view has been to favor value stocks that are historically “cheap”, the authors go in the other direction to favor growth since they feel a slow growth environment continues to favor the growth style of investing.
This all sounds very logical and reasonable to me and consistent with a long-term strategic approach that captures the broad trends in the economy and the capital markets.